Cognitive Biases: Mistakes or Missing Stakes?

Benjamin Enke, Uri Gneezy, Brian Hall, David C. Martin, Vadim Nelidov, Theo Offerman and Jeroen van de Ven ()

No 28650, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Despite decades of research on heuristics and biases, empirical evidence on the effect of large incentives – as present in relevant economic decisions – on cognitive biases is scant. This paper tests the effect of incentives on four widely documented biases: base rate neglect, anchoring, failure of contingent thinking, and intuitive reasoning in the Cognitive Reflection Test. In laboratory experiments with 1,236 college students in Nairobi, we implement three incentive levels: no incentives, standard lab payments, and very high incentives that increase the stakes by a factor of 100 to more than a monthly income. We find that response times – a proxy for cognitive effort – increase by 40% with very high stakes. Performance, on the other hand, improves very mildly or not at all as incentives increase, with the largest improvements due to a reduced reliance on intuitions. In none of the tasks are very high stakes sufficient to de-bias participants, or come even close to doing so.

JEL-codes: D01 D03 (search for similar items in EconPapers)
Date: 2021-04
New Economics Papers: this item is included in nep-cbe, nep-cwa, nep-exp, nep-hrm and nep-neu
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Citations: View citations in EconPapers (14)

Published as Benjamin Enke, Uri Gneezy, Brian Hall, David Martin, Vadim Nelidov, Theo Offerman, Jeroen van de Ven; Cognitive Biases: Mistakes or Missing Stakes?. The Review of Economics and Statistics 2021

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Working Paper: Cognitive Biases: Mistakes or Missing Stakes? (2020)
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