Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/34321
Authors: 
Oxoby, Robert J.
Year of Publication: 
2007
Series/Report no.: 
IZA Discussion Papers 2857
Abstract: 
When making judgments, individuals often utilize heuristics to interpret information. We report on a series of experiments designed to test the ways in which incentive mechanisms influence the use of a particular heuristic in decision-making. Specifically, we demonstrate how information regarding the number of available practice problems influences the behaviors of individuals preparing for an exam (the proportion heuristic). More importantly the extent to which this information influences behavior depends critically on the way in which performance incentives are structured. In particular, relative compensation schemes magnify the influence of this heuristic while joint compensation schemes dampen its influence. We discuss these results with respect to the literature on effective compensation.
Document Type: 
Working Paper

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