Blake Riley

Incentives to Exercise (2009) – Charness and Gneezy

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Monetary incentives are tricky things. At one point, economists thought payments could only increase the frequency of the behavior being rewarded. Following the psychological literature, the possibility of extrinsic motivations (e.g. cash) crowding out intrinsic motivation is now widely accepted. Especially if a reward is given and then removed, people can be much less inclined to engage in the behavior. Deci (1971) is the classic paper on intrinsic motivations being displaced.

Alternatively, cash rewards could give a person a boost in adopting a habit. If the payment is removed, but the habit has been established, rates of engagement could be higher than the baseline. Given the public policy interest in making or breaking habits like regular exercise or smoking, respectively, knowing whether payments have a positive or negative effects is vital. I’m agnostic whether public policy should encourage better lifestyles, but at the very least it should do no harm.

Charness and Gneezy (working paper) address crowding-out vs habit-formation by paying undergrads at two universities for gym attendance. In addition to a control, one group was required to attend the gym once to receive payment, while another was required to attend eight times in a month. If a participant did not attend the gym regularly prior to the intervention and was in the eight-time treatment, they went to the gym about 0.75 times more per week than the control after the reward period. This group also showed some health improvements. For everyone else, regulars or one-time, the intervention had no or slightly negative effect. So, with a positive, lasting effect for some and no apparent downside, monetary incentives for exercise might be worth considering. This may be due to the subjects acquiring a habit rather than losing one, because incentive programs for quitting smoking for instance lose effect once the payments stop.


Written by blakeriley

2011.02.1 at 20:31

Posted in economics, psychology

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