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Preference reversals in evaluations of cash versus non-cash incentives

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  • Shaffer, Victoria A.
  • Arkes, Hal R.

Abstract

Data are presented from six experiments that demonstrate preference reversals for cash versus non-cash incentives. When given a hypothetical choice between cash and non-cash incentives, participants chose the cash incentive (joint evaluation, JE). However when asked to evaluate them separately (separate evaluation, SE), participants gave higher ratings to the non-cash incentive; these findings were replicated with "real" monetary incentives. Preference reversals were partially dictated by the type of non-cash incentive offered: they were observed for hedonic non-cash incentives but not for utilitarian non-cash incentives. Preference reversals were caused by two factors: a shift in the dominant attribute under consideration and the presence of a value-seeking attribute that provides information about the rational choice. Specifically, participants consider the affective characteristics of the incentives during SE and the fungibility of the incentives during JE. Additionally, employees receiving rewards from an incentive program reported that recipients of non-cash awards would enjoy their reward more and would be more likely to tell their friends about it.

Suggested Citation

  • Shaffer, Victoria A. & Arkes, Hal R., 2009. "Preference reversals in evaluations of cash versus non-cash incentives," Journal of Economic Psychology, Elsevier, vol. 30(6), pages 859-872, December.
    • Handle: RePEc:eee:joepsy:v:30:y:2009:i:6:p:859-872
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    Cited by:

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    3. Alenka Lena Klopcic & Jana Hojnik & Stefan Bojnec & Drago Papler, 2020. "Global Transition to the Subscription Economy: Literature Review on Business Model Changes in the Media Landscape," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 18(4 (Winter), pages 323-348.
    4. Hal R. Arkes & John H. Kagel & Dimitry Mezhvinsky, 2017. "Effects of a Management–Labor Context and Team Play on Ultimatum Game Outcomes," Southern Economic Journal, John Wiley & Sons, vol. 83(4), pages 993-1011, April.
    5. Castillo, Geoffrey, 2021. "Preference reversals with social distances," Journal of Economic Psychology, Elsevier, vol. 86(C).
    6. Newman, Andrew H. & Tafkov, Ivo D. & Waddoups, Nathan J. & Xiong, Xiaomei Grazia, 2024. "The effect of reward frequency on performance under cash rewards and tangible rewards," Accounting, Organizations and Society, Elsevier, vol. 112(C).
    7. Hanna M. Sittenthaler & Alwine Mohnen, 2020. "Cash, non-cash, or mix? Gender matters! The impact of monetary, non-monetary, and mixed incentives on performance," Journal of Business Economics, Springer, vol. 90(8), pages 1253-1284, September.
    8. Krawczyk, Michał Wiktor, 2015. "Probability weighting in different domains: The role of affect, fungibility, and stakes," Journal of Economic Psychology, Elsevier, vol. 51(C), pages 1-15.
    9. Li, Xilin & Hsee, Christopher K., 2019. "Beyond preference reversal: Distinguishing justifiability from evaluability in joint versus single evaluations," Organizational Behavior and Human Decision Processes, Elsevier, vol. 153(C), pages 63-74.
    10. Choi, Jongwoon (Willie) & Presslee, Adam, 2023. "When and why tangible rewards can motivate greater effort than cash rewards: An analysis of four attribute differences," Accounting, Organizations and Society, Elsevier, vol. 104(C).
    11. Lee, Logan M. & Waddell, Glen R., 2021. "Diversity and the timing of preference in hiring decisions," Journal of Economic Behavior & Organization, Elsevier, vol. 184(C), pages 432-459.
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    Keywords

    Preference reversals Incentives;

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