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

University of Vienna

Matthias Sutter

Max Planck Institute for Research on Collective Goods

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)

University of Vienna ( email )

Bruenner Strasse 72
Vienna, Vienna 1090
Austria

Matthias Sutter

Max Planck Institute for Research on Collective Goods ( email )

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

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