The role of risk preference in referral reward programs

This study explores the impacts of the referrer's risk preference and reward size on the number of referrals and type of friends referred (i.e., tie strength). Risk preference (i.e., appetite for risk) is found to be related positively to the number of referrals and the percentage of weak ties reached, regardless of the reward. The effect differences between risk preference groups are greater if a medium-sized reward is offered, however, mainly due to the greater concavity exhibited by people with lower risk preference in their utility function.