The reinforcement paradox: Monetary incentives and Bayesian updating

Carlos Alós-Ferrer, Johannes Buckenmaier, Michele Garagnani and Alexander Ritschel

Economics Letters, 2022, vol. 211, issue C

Abstract: We report the results of two pre-registered experiments designed to study the reinforcement paradox: increased incentives often fail to increase and sometimes even decrease performance in Bayesian updating tasks. We argue that, in the presence of win/loss cues, higher incentives have two countervailing effects: increased error rates for reinforcement behavior (win-stay, lose-shift) and increased performance for decisions resulting from Bayesian updating. We find some evidence that incentives increase performance when the win/loss cue is removed whereas when reinforcement is active the effects of incentives are mixed.

Keywords: Bayesian updating; Incentives; Reinforcement (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:211:y:2022:i:c:s0165176521004511

DOI: 10.1016/j.econlet.2021.110200

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