The effect of incentive structure on search in the secretary problem

Yu-Chin Hsiao and Simon Kemp

Judgment and Decision Making, 2020, vol. 15, issue 1, 82-92

Abstract: We tested the effectiveness of performance-based incentive structures using three incentive structures — commission base, best only and flat fee — and two levels of context — no context and house-selling — in an experiment in which participants made decisions in a variant of the secretary problem. Key measures of performance were the amount of search and the rounds in which the very best (optimal) offer was chosen. We found that having a commission-based proportional incentive did not produce better performance than having a flat payment for any of the performance measures considered. However, another performance-based incentive — the best only — increased the length of their searches and led to more optimal offers. These results applied both when there was no context and when the context was selling a house.

Date: 2020
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