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Higher incentives can impair performance: neural evidence on reinforcement and rationality


Achtziger, Anja; Alós-Ferrer, Carlos; Hügelschäfer, Sabine; Steinhauser, Marco (2015). Higher incentives can impair performance: neural evidence on reinforcement and rationality. Social Cognitive and Affective Neuroscience, 10(11):1477-1483.

Abstract

Standard economic thinking postulates that increased monetary incentives should increase performance. Human decision makers, however, frequently focus on past performance, a form of reinforcement learning occasionally at odds with rational decision making. We used an incentivized belief-updating task from economics to investigate this conflict through measurements of neural correlates of reward processing. We found that higher incentives fail to improve performance when immediate feedback on decision outcomes is provided. Subsequent analysis of the feedback-related negativity, an early event-related potential following feedback, revealed the mechanism behind this paradoxical effect. As incentives increase, the win/lose feedback becomes more prominent, leading to an increased reliance on reinforcement and more errors. This mechanism is relevant for economic decision making and the debate on performance-based payment.

Abstract

Standard economic thinking postulates that increased monetary incentives should increase performance. Human decision makers, however, frequently focus on past performance, a form of reinforcement learning occasionally at odds with rational decision making. We used an incentivized belief-updating task from economics to investigate this conflict through measurements of neural correlates of reward processing. We found that higher incentives fail to improve performance when immediate feedback on decision outcomes is provided. Subsequent analysis of the feedback-related negativity, an early event-related potential following feedback, revealed the mechanism behind this paradoxical effect. As incentives increase, the win/lose feedback becomes more prominent, leading to an increased reliance on reinforcement and more errors. This mechanism is relevant for economic decision making and the debate on performance-based payment.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Social Sciences & Humanities > Experimental and Cognitive Psychology
Life Sciences > Cognitive Neuroscience
Uncontrolled Keywords:ERPs, FRN, Bayesian updating, reinforcement, incentives
Language:English
Date:29 November 2015
Deposited On:08 Jan 2021 14:37
Last Modified:09 Jan 2021 21:01
Publisher:Oxford University Press
ISSN:1749-5016
OA Status:Hybrid
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.1093/scan/nsv036

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