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Nudging Backward Induction

William Neilson (), Michael Price () and Mikhael Shor ()

No 2016-31, Working papers from University of Connecticut, Department of Economics

Abstract: A growing literature shows that interim incentives can help people achieve favorable long-term outcomes. We design a laboratory experiment to explore how interim incentives impact learning backward induction using a race game: Subjects play a simple game against a computer in which winning requires a sequence of correct moves. Our data highlight a perverse effect of incentives. Interim rewards inserted along the optimal path—nudges—help subjects learn patterns but crowd-out the skills required to solve a related game. Interim payments off the optimal path—teasers —can either help or hurt learning. JEL Classification: C91, D03, D60 Key words:

Pages: 42 pages
Date: 2016-10
New Economics Papers: this item is included in nep-cbe and nep-exp
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Handle: RePEc:uct:uconnp:2016-31