Time is Money - Time Pressure, Incentives, and the Quality of Decision-Making
30 Pages Posted: 22 Feb 2004
Date Written: January 2004
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: Suggested Citation