Could Reward Uncertainty Encourage Social Referral? Evidence from Large-scale Field Experiments

Information Systems and Operations Management

Speaker : Rodrigo BELO (Universidade Nova de Lisboa)

Room Bernard Ramanantsoa

Abstract:

Many platforms have incorporated uncertainty in referral rewards, but whether reward uncertainty can motivate more referrals is rarely investigated in the field. To fill the gap, this study conducted a two-period randomized experiment involving more than 160,000 users for two months to identify the causal effects of uncertain rewards on social referrals and the underlying mechanisms. Results show asymmetric effects of incorporating reward uncertainty in the sender's reward and the recipient's reward. The sender’s reward uncertainty invites more active recipients who make more further referrals, while the recipient’s reward uncertainty invites fewer and inactive recipients who make fewer further referrals. Our findings suggest that the asymmetric effects of reward uncertainty on the sender's and recipient's sides are driven by different mechanisms. Specifically, the positive effect of sender's reward uncertainty is driven by alleviating the sender's guilt perception and selecting the experienced recipients who have already referred others, leading to a high sharing likelihood and a high acceptance rate, respectively, and ultimately more referrals generated. In contrast, the negative effect of the recipient's reward uncertainty is driven by decreasing perceived fairness and recipients’ social pressure, which demotivate them to accept the invitation and then refer others.