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

Anja Achtziger, Carlos Alós-Ferrer, Sabine Hügelschäfer, Marco Steinhauser

Research output: Contribution to journalArticle

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.

Original languageEnglish (US)
Article numbernsv036
Pages (from-to)1477-1483
Number of pages7
JournalSocial cognitive and affective neuroscience
Volume10
Issue number11
DOIs
StatePublished - Dec 5 2014

Keywords

  • Bayesian updating
  • ERPs
  • FRN
  • Incentives
  • Reinforcement

ASJC Scopus subject areas

  • Experimental and Cognitive Psychology
  • Cognitive Neuroscience

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    Achtziger, A., Alós-Ferrer, C., Hügelschäfer, S., & Steinhauser, M. (2014). Higher incentives can impair performance: Neural evidence on reinforcement and rationality. Social cognitive and affective neuroscience, 10(11), 1477-1483. [nsv036]. https://doi.org/10.1093/scan/nsv036