Time is money - Time pressure, incentives, and the quality of decision-making

Martin Kocher and Matthias Sutter

Papers on Strategic Interaction from Max Planck Institute of Economics, Strategic Interaction Group

Abstract: Many decisions in economics and finance have to be made under severe time pressure. Furthermore, payoffs frequently depend on the speed of decision-making, like, for instance, when buying and selling stocks. In this paper, we examine the influence of time pressure and time-dependent incentive schemes on the quality of decision-making in an experimental beauty-contest game. We find that convergence to equilibrium is faster and payoffs are higher under low time pressure than under high time pressure. Interestingly, time-dependent payoffs under high time pressure lead to significantly quicker decision-making without reducing the quality of decisions.

Keywords: quality of decision-making; time pressure; incentives; beauty-contest experiment (search for similar items in EconPapers)
JEL-codes: C72 C91 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2004-02
New Economics Papers: this item is included in nep-cbe and nep-exp
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Related works:
Journal Article: Time is money--Time pressure, incentives, and the quality of decision-making (2006)
Working Paper: Time is money - Time pressure, incentives, and the quality of decision-making (2006)
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