Incentive Designs with Uncertainty: Keep the Hope Alive

While extant JDM literature shows that reward uncertainty can boost motivation, the present research takes a unique perspective on reward uncertainty and solves an optimization problem—how uncertainty maximizes the effort investment while holding the outcome payoff constant. Specifically, we consider an effort-score-payoff labor chain and locate uncertainty (randomness) either between “effort-score” or between “score-payoff” to structure the uncertain reward. Four studies found that adding uncertainty between “score” and “payoff” is more motivating. We explain this effect with the notion of keeping the hope alive. This research provides nuanced understandings about the psychology of reward uncertainty.