Work

The reinforcement paradox: Monetary incentives and Bayesian updating

Year: 2021

Type: article

Abstract: We report the results of two pre-registered experiments designed to study the reinforcement paradox: increased incentives often fail to increase and sometimes even decrease performance in Bayesian updating tasks. We argue that, in the presence of win/loss cues, higher incentives have two countervailing effects: increased error rates for reinforcement behavior (win-stay, lose-shift) and increased performance for decisions resulting from Bayesian updating. We find some evidence that incentives increase performance when the win/loss cue is removed whereas when reinforcement is active the effects of incentives are mixed.

Source: Economics Letters

DOI: 10.1016/j.econlet.2021.110200

Authors: Carlos Alós-Ferrer, Johannes Buckenmaier, Michele Garagnani, Alexander Ritschel

Institution: University of Zurich

Language: English

Topic: Decision-Making and Behavioral Economics

Subfield: General Decision Sciences

Field: Decision Sciences

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $2,000

Funders: National Science Foundation, Schweizerischer Nationalfonds zur Förderung der Wissenschaftlichen Forschung