Cognitive Biases: Mistakes or Missing Stakes?

79 Pages Posted: 12 Apr 2021 Last revised: 14 Apr 2023

See all articles by Benjamin Enke

Benjamin Enke

Harvard University

Uri Gneezy

University of California, San Diego (UCSD) - Rady School of Management

Brian J. Hall

NOM Unit Head, Harvard Business School; National Bureau of Economic Research (NBER)

David C. Martin

Harvard University

Vadim Nelidov

University of Amsterdam

Theo Offerman

University of Amsterdam - Faculty of Economics & Econometrics (FEE)

Jeroen van de Ven

University of Amsterdam; Tinbergen Institute

Multiple version iconThere are 2 versions of this paper

Date Written: April 2021

Abstract

Despite decades of research on heuristics and biases, empirical evidence on the effect of large incentives – as present in relevant economic decisions – on cognitive biases is scant. This paper tests the effect of incentives on four widely documented biases: base rate neglect, anchoring, failure of contingent thinking, and intuitive reasoning in the Cognitive Reflection Test. In laboratory experiments with 1,236 college students in Nairobi, we implement three incentive levels: no incentives, standard lab payments, and very high incentives that increase the stakes by a factor of 100 to more than a monthly income. We find that response times – a proxy for cognitive effort – increase by 40% with very high stakes. Performance, on the other hand, improves very mildly or not at all as incentives increase, with the largest improvements due to a reduced reliance on intuitions. In none of the tasks are very high stakes sufficient to de-bias participants, or come even close to doing so.

Suggested Citation

Enke, Benjamin and Gneezy, Uri and Hall, Brian and Martin, David C. and Nelidov, Vadim and Offerman, Theo and van de Ven, Jeroen, Cognitive Biases: Mistakes or Missing Stakes? (April 2021). NBER Working Paper No. w28650, Available at SSRN: https://ssrn.com/abstract=3824526

Benjamin Enke (Contact Author)

Harvard University ( email )

1875 Cambridge Street
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Uri Gneezy

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
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Brian Hall

NOM Unit Head, Harvard Business School ( email )

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National Bureau of Economic Research (NBER)

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David C. Martin

Harvard University ( email )

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Cambridge, MA 02138
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Vadim Nelidov

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

Theo Offerman

University of Amsterdam - Faculty of Economics & Econometrics (FEE) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 4294 (Phone)
+31 20 525 5283 (Fax)

Jeroen Van de Ven

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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