Self-Rewards and Cash (Dis)Incentives

Incentives are fundamental and often powerful motivators of human behavior. Considerable research has focused on financial rewards as a tool to encourage “good” decisions. This dissertation examines the psychology and efficacy of monetary incentives—compared to multiple nonmonetary incentives—with respect to individuals’ choices, performance, and habits. I document and explore a variety of interrelated effects that cash, relative to noncash, incentives can incur in four major areas of behavior: habit formation, choice (specifically, tradeoffs involving risk and delay), goal setting, and integrity. In three longitudinal field experiments, I devise and empirically test a novel incentive program based on self-reward, where individuals defined and administered their own rewards for reaching a goal. I find that this system outperforms cash on several consequential metrics, including task engagement and longer-term persistence. I further place these behaviors in the context of a greater focus on compensation when incentivized with cash: People become fixated on attaining the reward over the process of expending effort. Although this mentality fuels efficient goal attainment, it can also lead to—as I show using a series of online studies—distortionary effects on other aspects of goal pursuit, such as the tendency to choose easier effort streams and the willingness to forgo a reward’s magnitude for its certainty or immediacy. Combined, these findings suggest that practitioners seeking to motivate their constituents may do well to reconsider the use of cash incentives.