The effect of incentive structure on search in the secretary problem

Yu Chin Hsiao*, Simon Kemp

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

We tested the effectiveness of performance-based incentive structures using three incentive structures — commission base, best only and flat fee — and two levels of context — no context and house-selling — in an experiment in which participants made decisions in a variant of the secretary problem. Key measures of performance were the amount of search and the rounds in which the very best (optimal) offer was chosen. We found that having a commission-based proportional incentive did not produce better performance than having a flat payment for any of the performance measures considered. However, another performance-based incentive — the best only — increased the length of their searches and led to more optimal offers. These results applied both when there was no context and when the context was selling a house.

Original languageEnglish
Pages (from-to)82-92
Number of pages11
JournalJudgment and Decision Making
Volume15
Issue number1
Publication statusPublished - Jan 2020

Bibliographical note

Copyright © 2020. Version archived for private and non-commercial use with the permission of the author/s and according to publisher conditions. For further rights please contact the publisher.

Keywords

  • Context
  • Incentive
  • Secretary problem
  • Sequential decision-making

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