Spending Behavior and Rewards

Abstract

This paper examined how spending behavior is affected by rewards and various traits like the preference for candy, preference for gift cards, time-preference, income levels, gender, and age. An experiment was conducted to simulate how small, short term incentives to spend influence decisions to save for a larger, though uncertain, potential future reward. Candy was used as the small short-term reward, and the chance to win a $25 Amazon gift card was used as the potential future reward. Participants were recruited from SUNY Purchase economics and psychology classes. Each participant was given 10 raffle tickets, and each raffle ticket could be spent on either a piece of candy or on a chance to win the gift card. Half of the participants received an additional incentive to spend all their raffle tickets on candy; they received a giant chocolate egg if they spent everything on candy. The control condition was not provided with an incentive to spend all their tickets on candy. The experiment found the short-term incentive condition did not have a significant effect on spending, and none of the various traits had any effect on spending. However, these results should be viewed as inconclusive due to an inadequate sample size. More data are necessary to make any conclusions about the importance and effectiveness of rewards when it comes to spending.