Ambiguous Incentives and the Persistence of Effort: Experimental Evidence
Groupe d’Analyse et de Théorie Économique Working Paper No. 1018
47 Pages Posted: 1 Sep 2010 Last revised: 15 Jan 2014
Date Written: January 14, 2014
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, ambiguity, intermittent reinforcement, effort, quitting, learning, experiment
JEL Classification: C92, M54, J28, J31
Suggested Citation: Suggested Citation