The effect of incentive structure on search in the secretary problem

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.

Keywords

• sequential decision-making
• secretary problem
• incentive
• contextnakeywords