We’ve all heard the phrase, “Everyone has a price." But paying someone to do what we want doesn’t always work. We know now that human beings are far more complicated; sometimes, we do things for no money at all, and other times no amount of remuneration will budge us.
A great example of ineffective incentive use was found by Gneezy and Rustichini (2000). Israeli daycare providers began charging a small fee to parents who showed up more than ten minutes late to pick up their children. However, the rate of late pickups actually doubled following the fine’s implementation. Even more interesting: When the fine was removed altogether, instead of returning to baseline, parents were even tardier picking up their kids than they had been before! In this case, it seems that a small incentive made the situation worse.
On the other hand, Volpp et al. (2006, 2009) were successful at getting individuals to quit smoking for practically pennies on the dollar. Health risks aside, smoking can cost over a thousand dollars a year for a light smoker, and over two thousand for someone with a pack-a-day habit in America. This adds up to between $42,000 and $84,000 over 20 years. Quitting on one’s own, therefore, makes economic sense, but Volpp et al. found that significantly more smokers were able to stick with their cessation if they were offered relatively small, incremental incentives. How could incentives be effective in one case but not the other?
The answer to this puzzle is, of course, that people respond to incentives other than money. For example, in the United States, a woman who agrees to be a surrogate mother can be compensated from $35,000 to $45,000 and upwards. However, just north of the border in Canada, it is actually illegal to pay a surrogate for her services, making “altruistic surrogacy” the only option. Nonetheless, one estimate claims a 400 percent increase in Canadian surrogacy in the last decade. In this case, the incentive for potential surrogates isn’t money; it’s a moral calling.
In our daycare example, parents originally felt bad for picking up their children late. However, once a relatively low price for this behavior had been set, they understood that it wasn’t “that bad,” and maybe even saw it as a fair price for extended care. Even after the fee had been removed, it was impossible to revert to feeling as bad as they originally felt about arriving late; thus, the tardiness continued. What made the intervention ineffective was the alleviation of guilt by setting a price on it.
The smoking intervention’s success may have had little to do with the amount of money offered. Although smokers might know that smoking is expensive, giving them salient rewards, i.e., cold, hard cash for achieving small subgoals ($100 for completing the educational program, $250 for six months and $400 for six months after that), was much more effective than working toward an abstract amount of money saved over time with cessation. Additionally, the program itself served as a commitment device, and participants understood they had someone to whom they could report their failures or successes.
The findings of these and other studies help us to understand that financial incentives aren’t straightforward. We can get more bang for our buck (pun intended) depending on when and how they are delivered. Lotteries have been particularly popular because, overall, people prefer a small chance at a big prize over a big chance at a small prize. Lottery incentives have been used to try to improve adherence to blood thinners, antiretrovirals and even gym attendance. One famous example from Glasgow’s 1957 anti-tuberculosis campaign increased expected tuberculosis screening threefold by implementing a weekly prize.
The Envolve Center for Health Behavior Change™ is currently working on finding out what kind of incentives, under what circumstances, work best to help people achieve their health goals. One of these studies, which works with the Healthy Solutions for Life pediatric asthma program, has set out to determine whether the right kind of incentive can motivate parents of children with asthma to adhere to a telephonically delivered health coaching program.
Overall, it is important not to underestimate the complexity behind monetary incentives. Not only do people respond differently to how monetary reward schemes are structured, but other drivers – such as values, norms and personal goals – may override the perceived value of money altogether.
About the Authors
Ruth Shach is a researcher at the Envolve Center for Behavior Change. Prior to this, she has worked at the Gertner Institute for Epidemiology and Health Policy Research, and the Jerusalem College of Technology in Israel, focusing on contexts for decision making in health policy, overuse of and disinvestment in health services, and patient engagement. She received her MPH from Tel Aviv University, Israel, and her BA (Hons) in psychology from York University, Canada. Her interests include health and economic policy, specifically utilizing behavioral insights to structure interventions in order to achieve greater effectiveness and efficiency.
Lynn Zhao is a Master of Social Work student at the Brown School at Washington University in St. Louis. She works with the Envolve Center as a research fellow and focuses on behavioral economics and health behavior change.
Gneezy, U., & Rustichini, A. (2000). A fine is a price. The Journal of Legal Studies, 29(1), 1-17.
Volpp, K. G., Levy, A. G., Asch, D. A., Berlin, J. A., Murphy, J. J., Gomez, A., ... & Lerman, C. (2006). A randomized controlled trial of financial incentives for smoking cessation. Cancer Epidemiology and Prevention Biomarkers, 15(1), 12-18.
Volpp, K. G., Troxel, A. B., Pauly, M. V., Glick, H. A., Puig, A., Asch, D. A., ... & Corbett, E. (2009). A randomized, controlled trial of financial incentives for smoking cessation. New England Journal of Medicine, 360(7), 699-709.
Walque, D. (2015, April 8). Risk, Sex and Lotteries. Can lotteries be used as incentives to prevent risky behaviors? | Impact Evaluations. Retrieved from https://blogs.worldbank.org/impactevaluations/risk-sex-and-lotteries-can-lotteries-be-used-incentives-prevent-risky-behaviors