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Ambiguous Incentives and the Persistence of Effort: Experimental Evidence

Robin Hogarth () and Marie Claire Villeval ()

No 1432, Working Papers from Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon

Abstract: When the assignment of incentives is uncertain, we study how the regularity and frequency of rewards and risk attitudes influence participation and effort. We contrast three incentive schemes in a real-effort experiment in which individuals decide when to quit : a continuous incentive scheme and two intermittent ones, fixed and random. In all treatments, we introduce a regime shift by withdrawing monetary rewards after the same unknown number of periods. In such an ambiguous environment, we show that less able and more risk averse players are less persistent in effort. Intermittent incentives lead to a greater persistence of effort, while continuous incentives entail exit as soon as payment stops. Randomness increases both earlier and later exiting. This selection effect in terms of ability and risk attitudes combined with the impact of intermittent rewards on persistence lead to an increase in mean performance after the regime shift when incentives are intermittent.

Keywords: Incentives; intermittent reinforcement; randomness; effort; quitting; learning; experiment (search for similar items in EconPapers)
JEL-codes: C92 D84 M54 J31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-hrm
Date: 2014
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Journal Article: Ambiguous incentives and the persistence of effort: Experimental evidence (2014) Downloads
Working Paper: Ambiguous incentives and the persistence of effort: Experimental evidence (2014) Downloads
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