For my current game, we're almost wrapping up and starting to add some "reward milestones." We have high scores, but we also want to have stars - ie. for each level, you can get 1-4 stars depending on how long you survive. I was wondering if there were any books or articles on how to pace out stars? Ie. why not have 10 stars per level vs. the standard 3-4 stars? What are the psychological effects of doing so? Would too many stars "cheapen" the experience, etc. etc.
Well, I can't speak definitively, but generally people are best at understanding things in groups of ~4 or less. Read "The Magical Number Seven Plus Or Minus Two"
for a bit more detail.
But basically, the idea is that people can only distinguish a small number of things on a single criteria. This is all well and good for things like brightness, frequency, etc., but gets a bit wishy washy when it comes to things like "stars", but the take away is that people don't know how to interpret the extra precision. It's why a scoring system like IGN's 7.3's and 8.1's don't inform people better than a yes/no, 3 star, 4 star, or whatever rating system.