Incentives

What is it?  Reward and punishment have long been used to direct behaviour. However, introducing extrinsic motivational consequences such as these can fundamentally change how we view a situation, in turn altering our motivation and subsequent action. As such, they must be carefully applied in order to be effective, and to avoid pitfalls which drive unintended behaviour.   

For example, the introduction of a monetary fine for parents who are late to collect their children from nursery actually increased the rate of overdue pick-ups¹. In this situation, the financial penalty transforms a typically social transaction into an economic one, and absolves parents of guilt by enabling them to “pay” for their tardiness.  

Reports suggest economic fines for those travelling to holiday or second homes during lockdown have also been ineffective. So whilst it is natural to assume applying consequences always increase behaviour and aversive ones will decrease it, the above examples make clear that incentives and punishment need to carefully designed. It is essential for us to consider emotional and social factors, as well as economic and tangible ones.

How to use it:   

1. To Apply or Not To Apply – dieters rewarded for losing weight with financial incentives often regain weight once a programme is stopped². This is because external rewards can detract from more naturally occurring motivation, meaning when the incentive is removed, individuals are left with no reason to maintain behaviour³. Therefore, we should be mindful of applying incentives to situations in which they might damage pre-existing motivation, such as prosocial action like volunteering⁴.  

2. Considering the Cause – we should segment different populations and identify their most compelling motivatiors dependent on the precise situation. For example, affluent second home owners are unlikely to be deterred from visiting their properties during lockdown by a £30 fine. However, identifying more salient punishments, such as social stigma, or public shaming, may be more effective. Tackling the largest group of perpetrators first will help shift social norms around undesirable action. 

3. Reference Points – the value of something depends on where we see it from. Framing options in relation to a reference point (for example, in terms of the ‘cost of a cup of coffee’) makes it easier for us to compute costs and rewards⁵. As such, we can change the perception of punishment and reward by contextualizing them within different reference points. For example, comparing staying home during the relatively short period of lockdown to experiencing the rest of a lifetime after Covid-19. 

References 

1.Levitt, S. D. & Dubner, S. Freakonomics. (B DE BOOKS, 2014). 

2.Cawley, J. & Price, J. A. A case study of a workplace wellness program that offers financial incentives for weight loss. J. Health Econ. 32, 794–803 (2013). 

3.Vansteenkiste, M., Niemiec, C. P. & Soenens, B. The Development Of The Five Mini-Theories Of Self-Determination Theory: A Historical Overview, Emerging Trends, and Future Directions. (2008). Doi:10.1108/S0749-7423(2010)000016a007 

4.Chakravarti, A. & Thomas, M. Why paying people to donate blood does not pay. 149–186 (2015). doi:10.1057/9781137466693_10 

5.Thornton, R. L. The demand for, and impact of, learning HIV status. Am. Econ. Rev. 98, 1829–1863 (2008).