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

See all articles by Robin M. Hogarth

Robin M. Hogarth

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Marie Claire Villeval

Groupe d'Analyse et de Théorie Economique (GATE), CNRS; IZA Institute of Labor Economics; Global Labor Organization (GLO)

Multiple version iconThere are 2 versions of this paper

Date Written: January 14, 2014

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, ambiguity, intermittent reinforcement, effort, quitting, learning, experiment

JEL Classification: C92, M54, J28, J31

Suggested Citation

Hogarth, Robin M. and Villeval, Marie Claire, Ambiguous Incentives and the Persistence of Effort: Experimental Evidence (January 14, 2014). Groupe d’Analyse et de Théorie Économique Working Paper No. 1018, Available at SSRN: https://ssrn.com/abstract=1670074 or http://dx.doi.org/10.2139/ssrn.1670074

Robin M. Hogarth (Contact Author)

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

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Spain
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Marie Claire Villeval

Groupe d'Analyse et de Théorie Economique (GATE), CNRS ( email )

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Ecully, 69130
France
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+33 472 86 60 90 (Fax)

HOME PAGE: http://www.gate.cnrs.fr/equipe/perso/villeval/villeval.html

IZA Institute of Labor Economics

P.O. Box 7240
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Germany

Global Labor Organization (GLO) ( email )

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Germany

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