The Effects of Effort and Intrinsic Motivation on Risky Choice

Ran Kivetz ()
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Ran Kivetz: Graduate School of Business, Columbia University, 3022 Broadway, New York, New York 10027

Marketing Science, 2003, vol. 22, issue 4, 477-502

Abstract: People often need to trade off between the probability and magnitude of the rewards that they could earn for investing effort. The present paper proposes that the conjunction of two simple assumptions (relating effort-induced reward expectations to prospect theory's value function) provides a parsimonious theory that predicts that the nature of the required effort will have a systematic effect on such trade-offs. Using the case of frequency (or loyalty) programs, a series of five studies involving both real and hypothetical choices demonstrated that (a) the presence (as opposed to absence) of effort requirements enhances the preference for sure-small rewards over large-uncertain rewards; (b) the preference for reward certainty is attenuated when the effort activity is intrinsically motivating; and (c) continuously increasing the effort level leads to an inverted-U effect on the preference for sure-small over largeuncertain rewards. The studies also employ process measures and examine the mechanisms underlying the impact of the effort stream on the trade-off between the certainty and magnitude of rewards. The final section discusses the theoretical implications of this research as well as the practical implications with respect to frequency programs and other types of incentive systems.

Keywords: Effort and Reward; Decisions Under Uncertainty; Frequency/Loyalty/Reward Programs; Incentive Systems; Intrinsic Motivation; Psychology of Rewards; Risky Choice (search for similar items in EconPapers)
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:22:y:2003:i:4:p:477-502

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