I think Vassar made this argument (incentives do not fix bias) based on the assumptions that
Markets can be irrational even if a large portion of investors are rational. It's complex.
For one thing, many investors have to find hedged positions (e.g. pension fund managers), and often there aren't good hedges for mispriced securities. Risk aversion and time discounting make things worse, especially if the irrational investors are more risk-tolerant than the rational ones.
I'm trying to better understand the relationship between incentivization and rationality, and it occurred to me that it is a "folk fact" around here that large financial incentives don't make cognitive biases go away.
However, I can't seem to find any papers that actually say this. It's not easy to google for (I have tried) so I wonder if the Less Wrong collective memory knows how to find the papers?
Is there a pattern to which biases go away with incentivization? Do we have at least 5 examples of biases that go away with incentivization and 5 examples that don't go away with incentivization?
As an incentive, I'll paypal $10 to the commenter whose answer is least biased and most useful.