Self-Rewards and Personal Motivation

Abstract

Self-administered rewards are ubiquitous. They serve as incentives for personal accomplishments and are widely recommended to increase personal motivation. We show that in a model with time-inconsistent and reference-dependent preferences, self-rewards can be a credible and effective tool to overcome self-control problems. We also characterize the type of self-rewards that can be used, such as vice goods and virtue goods, and analyze which types of goods will be preferred by the individual.

Keywords: Quasi-hyperbolic discounting, reference-dependent preferences, loss aversion, self-control, self-rewards, goals

JEL Classification: D03, D81, D91