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Commitment to Self-Rewards

  • Koch, Alexander K.

    ()

    (Aarhus University)

  • Nafziger, Julia

    ()

    (Aarhus University)

Self-administered rewards are ubiquitous. They serve as incentives for personal accomplish¬ments and are widely recommended as tools for overcoming self-control problems. However, it seems puzzling why self-rewards can work: the prospect of a reward has a motivating force only if the threat of self-denial of the reward after low performance is credible. We explain how a rational forward-looking individual may achieve commitment to self-rewards, by applying Köszegi and Rabin's (2006) model of endogenous reference point formation to a self-regulation problem. Our results show why and when self-regulation built on self-rewards can be successful and thus illustrate the power, but also the limits, of self-rewards.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4049.

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Length: 22 pages
Date of creation: Feb 2009
Date of revision:
Publication status: published in European Economic Review , 2014, 68, 151-167.
Handle: RePEc:iza:izadps:dp4049
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