Gameify

Students were given a choice between two simple tasks. One would take six minutes, and the students were told that they would get a gallon of Haagen-Dazs vanilla ice cream as a reward. The other would require seven minutes of work, and the payment would be a gallon of Haagen-Dazs pistachio.

Not surprisingly, since the second option involved more work and a less popular flavor, only about a quarter of the students chose it.

But the researchers also repeated the experiment with a couple of tweaks. In the new version, the six-minute task led to a payoff of 60 points, and the seven-minute task brought 100 points.

The researchers then told the students that anyone who finished with between 50 and 99 points would be given a gallon of vanilla ice cream. Anyone with 100 points would get pistachio.

Practically, there was no difference between the two experiments. But the outcomes ended up being very different.

How do people work out, in their heads, the exchange rates between points and virtual currencies and real world currencies?

Are points an example of virtual objects imbued, by the endowment effect, with a sense of significance and therefore value?

The first time I arrived in Poland, in 1991, it was hot and I was thirsty. I went up to a stallholder at the train station to buy a can of coke - it was about 40000 zloty. I couldn't do it. Even though it was only 50p or so, I couldn't spend 'that much' money.

Is this what's behind our point-blindness?

According to Hsee, Yu, Zhang and Zhang it's Medium Maximisation [warning: PDF], which they explain in pointy-head fashion:

Since the medium is inherently worthless, people should skip it and base their decision solely on the effort : outcome relationship. However, the effort : outcome relationship is typically not directly given, and one has to infer it from the two typically given relationships: the relationship between effort and the immediate payoff in medium (effort : medium) and the exchange relationship between medium and outcome (medium : outcome). In order to effectively skip the medium, one has to pay equal attention to these two types of relationships. Our tenet is that people often fail to fully skip the medium and they maximize not just the effort : outcome return but also the effort : medium return. We refer to the pursuit of the effort : medium return as medium maximization.

We tend to value things by their nominal value rather than their inflation-adjusted value. A 10% pay rise at a time of 11% inflation is more satisfying than a 5% pay rise at a time of 1% inflation. This pyschological myopia is called Money illusion. My can of Coke in Poland was nominally very very expensive. (Like monkeys and my children, we prefer 10 x £1 coins to 1 x £50 note...)

Read the paper for more.

The conclusions are interesting:

Typically, the longer or harder we work, the more money and material goods we can receive. In other words, the relationship between work and wealth/material goods is usually riskless and linear. However, the relationship between money/material goods and ultimate happiness is usually uncertain and concave. What the current research suggests is that money/material goods can serve as a medium that creates illusions of certainty and linearity. Thus, people, who focus on these media are likely to overwork and overaccumulate money/material goods.