Markets with and without money

By | 9.8.2016

Heyman and Ariely conducted three experiments verifying several hypotheses about the relationship between the effort one makes and rewards paid back in return. In particular, they distinguished between behavior on two different markets: (i) social market (market with no money), and (ii) monetary market; arguing that once we introduce money, people abound their willingness to help (as much as they can) and condition their effort by a level of payments. Thus, not paying the subjects at all led to high exhibited effort, probably motivated by altruistic incentives, whereas offering them a low amount of money caused significantly lower performance. However, as the payment increased the willingness to help increased as well.

The figure captures the results of an experiment in which students were asked to solve mathematical problems which had no solution and researchers measured the length of time before giving up. It clearly shows that not being paid, denoted as a control group, was associated with the highest effort, whereas students motivated by a low payment have searched for a solution for only half the time expended by the control group.  However, when the subjects were offered higher rewards, their effort level raised up to the control group level. Moreover, this experiment also revealed that the presence of money is not crucial and to obtain the same results, it is enough to let the subjects know about the monetary price of the rewards.

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Reference: Heyman, J., & Ariely, D. (2004). Effort for payment: a tale of two markets. Psychological science, 15(11), 787-793. Available here.

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