Time is Money - Time Pressure, Incentives, and the Quality of Decision-Making

30 Pages Posted: 22 Feb 2004

See all articles by Martin G. Kocher

Martin G. Kocher

Ludwig Maximilian University of Munich - Faculty of Economics; Institute for Advanced Studies (IHS) - Department of Economics & Finance; Göteborg University - School of Business, Economics and Law; Queensland University of Technology - School of Economics and Finance

Matthias Sutter

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods; University of Cologne - Department of Economics

Date Written: January 2004

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

JEL Classification: C72, C91

Suggested Citation

Kocher, Martin G. and Sutter, Matthias, Time is Money - Time Pressure, Incentives, and the Quality of Decision-Making (January 2004). Available at SSRN: https://ssrn.com/abstract=505242 or http://dx.doi.org/10.2139/ssrn.505242

Martin G. Kocher (Contact Author)

Ludwig Maximilian University of Munich - Faculty of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany

Institute for Advanced Studies (IHS) - Department of Economics & Finance ( email )

Stumpergasse 56
A-1060 Vienna, A-1060
Austria

Göteborg University - School of Business, Economics and Law ( email )

Vasagatan 1
Goteborg, 40530
Sweden

Queensland University of Technology - School of Economics and Finance ( email )

GPO Box 2434
2 George Street
Brisbane, Queensland 4001
Australia

Matthias Sutter

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

University of Cologne - Department of Economics

Cologne, 50923
Germany

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