Core Readings

Ariely, Dan., Uri Gneezy, George Loewenstein, and Nina Mazar, (2009). "Large stakes and big mistakes," The Review of Economic Studies, 76(2): 451-469.

Conducts a set of experiments in the U.S. and in India in which subjects worked on different tasks and received performance-contingent payments that varied in amount from small to very large relative to their typical levels of pay. With some important exceptions, very high reward levels had a detrimental effect on performance.

Coates, John M., Mark Gurnell and Aldo Rustichini. “Second-to-fourth digit ratio predicts success among high-frequency financial traders” Proceedings of the National Academy of Sciences, January 13, 2009 106 (2) 623-628

An easy-to-observe marker of prenatal androgen exposure predicts success and survival among London City high-stakes noise traders.

Newer Resources

Gross P. Daniel, (2018). "Creativity Under Fire: The Effects of Competition on Creative Production," NBER working Paper No. 25057.

Studies the incentive effects of competition on individuals' creative production. A sample of commercial logo design competitions, and a novel, content-based measure of originality shows that intensifying competition induces agents to produce original, untested ideas over tweaking their earlier work, but heavy competition drives them to stop investing altogether.

Neyse, Levent, Magnus Johannesson & Anna Dreber. "2D:4D does not predict economic preferences: Evidence from a large, representative sample." Journal of Economic Behavior and Organization, 185: 390-401.

The authors re-evaluate a recent series of small-sample studies claiming that digit ratio (2D:4D) is associated with a number of economic preferences, including risk taking, altruism, positive reciprocity, negative reciprocity and trust. Using a large pre-registered experiment on a representative sample of adults, the authors find no statistically significant association between 2D:4D and economic preferences.

Enke, Benjamin, Uri Gneezy, Brian Hall, David C. Martin, Vadim Nelidov, Theo Offerman, and Jeroen van de Ven (2021) Cognitive Biases: Mistakes or Missing Stakes? NBER working paper no. 28650

This paper tests the effect of incentives on four widely documented biases in human decisionmaking: base rate neglect, anchoring, failure of contingent thinking, and intuitive reasoning (as measured by Cognitive Reflection Test). In laboratory experiments with 1,236 college students in Nairobi, the authors show that very high stakes raise the time taken to make decisions by 40 percent. Performance, on the other hand, improves very mildly or not at all. Even the highest incentives fail to completely de-bias the participants (i.e. induce rational decisions).

Ambuehl, S., Niederle, M., & Roth, A. E. (2015). More money, more problems? can high pay be coercive and repugnant? American Economic Review, 105(5), 357– 360.

This study asks whether people view high economic incentives as unfair or coercive. In a vignette experiment about the ethicality of medical trials, the authors show that a substantial of minority of subjects believes they are. They think high incentives would cause more people to regret their decisions and view incentivizing poorer participants as being especially repugnant.

Fehr, Dietmar, Günther Fink, and B. Kelsey Jack 2022 Poor and Rational: Decision-Making under Scarcity Journal of Political Economy, volume 130, number 11, November 2022

Does the stress of being poor lead people to make less rational economic decisions? The authors gave farmers in Zambia the opportunity to exchange randomly assigned household items for alternative items of similar value. Analyzing a total of 5,842 trading decisions and leveraging multiple sources of variation in financial constraints, they show that the farmers made fewer irrational decisions when they were more financially constrained.