However, if you approach them with a serious deal where some bias identified in the lab would lead them to accept unfavorable terms with real consequences, they won't trust their unreliable judgments, and instead they'll ask for third-party advice and see what the normal and usual way to handle such a situation is. If no such guidance is available, they'll fall back on the status quo heuristic. People hate to admit their intellectual limitations explicitly, but they're good at recognizing them instinctively before they get themselves into trouble by relying on their faulty reasoning too much. This is why for all the systematic biases discussed here, it's extremely hard to actually exploit these biases in practice to make money.
Yeah... that sounds right. Also, suppose that you have an irrational stock price. One or two contrarians can't make much more than double their stake money out of it, because if they go leveraged, the market might get more irrational before it gets less irrational, and wipe their position.
"The market can stay irrational longer than you can stay solvent." - John Maynard Keynes
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.