This Article Full Text (PDF) References Alert me when this article is cited Alert me if a correction is posted Services Email this article to a friend Similar articles in this journal Alert me to new issues of the journal Download to citation manager Citing Articles Citing Articles via HighWire Citing Articles via Google Scholar Google Scholar Articles by Kivetz, R. Search for Related Content

The Effects of Effort and Intrinsic Motivation on Risky Choice

Graduate School of Business, Columbia University, 3022 Broadway, New York, New York 10027
rk566{at}columbia.edu

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.

Key Words: Effort and Reward; Decisions Under Uncertainty; Frequency/Loyalty/Reward Programs; Incentive Systems; Intrinsic Motivation; Psychology of Rewards; Risky Choice
History: Received: December 10, 2002;

This article has been cited by other articles:

				M. McCall and C. Voorhees The Drivers of Loyalty Program Success: An Organizing Framework and Research Agenda Cornell Hospitality Quarterly, February 1, 2010; 51(1): 35 - 52. [Abstract] [PDF]

				M. M. Botvinick, S. Huffstetler, and J. T. McGuire Effort discounting in human nucleus accumbens Cogn Affect Behav Neurosci, March 1, 2009; 9(1): 16 - 27. [Abstract] [PDF]

				O. Amir, D. Ariely, and Z. Carmon The Dissociation Between Monetary Assessment and Predicted Utility Marketing Science, November 1, 2008; 27(6): 1055 - 1064. [Abstract] [PDF]

				S. M. Shugan Brand Loyalty Programs: Are They Shams? Marketing Science, January 1, 2005; 24(2): 185 - 193. [Abstract] [PDF]

				U. M. Dholakia and I. Simonson The Effect of Explicit Reference Points on Consumer Choice and Online Bidding Behavior Marketing Science, January 1, 2005; 24(2): 206 - 217. [Abstract] [PDF]

				R. T. Rust and P. C. Verhoef Optimizing the Marketing Interventions Mix in Intermediate-Term CRM Marketing Science, January 1, 2005; 24(3): 477 - 489. [Abstract] [PDF]

				V. Mittal, E. W. Anderson, A. Sayrak, and P. Tadikamalla Dual Emphasis and the Long-Term Financial Impact of Customer Satisfaction Marketing Science, January 1, 2005; 24(4): 544 - 555. [Abstract] [PDF]

				S. M. Shugan Endogeneity in Marketing Decision Models Marketing Science, January 1, 2004; 23(1): 1 - 3. [Abstract] [PDF]