Cognitive Biases: Mistakes or Missing Stakes?

Benjamin Enke, Uri Gneezy, Brian Hall, David Martin, Vadim Nelidov, Theo Offerman and Jeroen van de Ven
Additional contact information
Benjamin Enke: Harvard University and NBER
Uri Gneezy: UC San Diego Rady School of Management
Brian Hall: Harvard Business School
David Martin: Harvard University
Vadim Nelidov: University of Amsterdam and Tinbergen Institute
Theo Offerman: University of Amsterdam and Tinbergen Institute
Jeroen van de Ven: University of Amsterdam and Tinbergen Institute

The Review of Economics and Statistics, 2023, vol. 105, issue 4, 818-832

Abstract: Despite decades of research on heuristics and biases, evidence on the effect of large incentives on cognitive biases is scant. We test the effect of incentives on four widely documented biases: base-rate neglect, anchoring, failure of contingent thinking, and intuitive reasoning. In laboratory experiments with 1,236 college students in Nairobi, we implement three incentive levels: no incentives, standard lab payments, and very high incentives. We find that very high stakes increase response times by 40% but improve performance only very mildly or not at all. In none of the tasks do very high stakes come close to debiasing participants.

Date: 2023
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