title: Higher incentives can impair performance: neural evidence on reinforcement and rationality.
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.
authors: Department of Social Sciences, Zeppelin University Friedrichshafen, Friedrichshafen, Germany.
authors: Anja
authors: A
authors: Achtziger
authors: Department of Economics, University of Cologne, Cologne, Germany, and carlos.alos-ferrer@uni-koeln.de.
authors: Carlos
authors: C
authors: Alós-Ferrer
authors: Department of Economics, University of Cologne, Cologne, Germany, and.
authors: Sabine
authors: S
authors: Hügelschäfer
authors: Department of Psychology, Catholic University of Eichstätt-Ingolstadt, Eichstätt, Germany.
authors: Marco
authors: M
authors: Steinhauser
mesh_terms: D000328:Adult; D003657:Decision Making / Q000502:physiology*; D005071:Evoked Potentials / Q000502:physiology*; D030141:Feedback, Psychological / Q000502:physiology*; D005260:Female; D006801:Humans; D008297:Male; D009042:Motivation / Q000502:physiology*; D011597:Psychomotor Performance / Q000502:physiology*; D012054:Reinforcement, Psychology; D012201:Reward; D055815:Young Adult
keywords: Bayesian updating; ERPs; FRN; incentives; reinforcement