BITH: Buying Behavior Part Two

This year’s Society for Judgment and Decision Making conference featured a symposium organized by CMU’s Leslie John and Jessica Wisdom on “Behavioral Economics and Health.” One of the papers presented in this symposium (by Ms. John) just became Behavior in the Headlines (BITH). The study, “Financial Incentive–Based Approaches for Weight Loss,” was recently published in JAMA and it is starting to be picked up by the popular press including the Pittsburgh Post-Gazette. The CMU website sums up the results quite nicely:

“[The study] …placed adult dieters into three groups. One group entered a daily lottery and received winnings only if they reached their targeted weight levels. A second group invested their own money, but lost it if they didn't meet their goals. The third group was given no monetary incentive at all.

The goal: lose a pound a week over 16 weeks.

The results were striking. The mean weight loss for both incentive groups was more than 13 pounds — with about half the participants reaching the 16-pound goal. But the mean weight loss for the control group was only 4 pounds.”

Followers of this blog will note that this is not the first time that schemes using financial rewards to elicit good behavior and their potential pitfalls have been discussed. I am curious as to how these results square with Uri Gneezy and Aldo Rustichini’s study mentioned in previous posts on an undesirable practice of day care center parents. In their study, when financial incentives were used to incent good behavior it backfired in an irreversible way. Dan Ariely’s explanation claims that when incentives are taken from the domain of social exchange to the domain of economic exchange the process cannot easily be reversed. This would suggest that when the financial incentive is removed in the weight loss study, subjects should whiplash back to bad behavior, as they have no further economic motivation to continue. What happened?

During the next seven months the subjects in all groups did gain weight back but apparently not as much weight as they had lost. To me this result is inconclusive. Logically, if a lot of weight was lost it will require that a lot of weight to be added back, which simply takes time. Perhaps seven months is not long enough. How rapid was the rate of weight regain by subject group? Are the high weight loss subjects gaining back at a faster rate? Will subjects eventually overshoot their old weight and end up heavier and worse off than they were before? The next layer of questions involves whether or not it was the financial incentive itself or the focusing/scoring/gaming process (beyond mere weigh-ins) that caused subjects to lose weight. In summary this is a great study attacking an important problem while opening up a number of good new research questions. I’m "hungry" for more papers from this world class group of collaborators.

Co-Authors: Kevin G. Volpp, MD, PhD; Leslie K. John, MS; Andrea B. Troxel, ScD; Laurie Norton, MA; Jennifer Fassbender, MS; George Loewenstein, PhD

BITH: Buying Behavior

(Carol Leone Childcare)

Behavior in the Headlines: Harvard Economics Professor Roland Fryer has an idea to boost performance in our failing schools – pay the students. A new program called Capital Gains is being piloted in the Washington DC area and it is paying students up to $1,500 for good performance in a variety of areas including testing and attendance. The thinking behind the program is that better incentives will encourage students to exhibit better behavior, leading them eventually to academic success. There are no hard data yet on the effectiveness of the approach so the program is currently being run as an experiment. A short movie on the DC pilot can be viewed here.

Fryer’s motive is laudable and his approach has merit; however, the DC experiment is not without risk. By providing financial incentives, Capital Gains is moving the expectation for good scholastic performance from the domain of social exchange to the domain of economic exchange. Such a transition may produce results in the opposite direction intended and the change caused by the program may be difficult to reverse.

Take for example Uri Gneezy and Aldo Rustichini’s study on an undesirable practice of day care center parents. In their resulting paper, “A Fine is a Price,” Gneezy and Rustichini describe the over-time hours and other difficulties for day care center staff caused by late child pick-ups. Day care center management imposed a financial penalty on tardy patents to discourage the practice; however, management was in for a surprise. Late pick-ups actually increased substantially after the fine policy was imposed. Further, when the day care centers later tried to remove the fine, the occurrence of late pick-ups remained at its new, higher level. One explanation for these results, also championed by Dan Ariely in his new book Predictably Irrational, is that parents no longer felt obligated by social contract to pick-up their children on time. The guilt of imposing a social difficulty was replaced by a specific economic value. If the fine price was lower than the value parents placed on the extra effort needed to get to the day care on time, parents simply showed up late and paid the fine. Once in this economic realm it was difficult to reverse the new framing. Dropping the fine merely gave parents a new fine “price” of zero dollars.

The study discussed was focused on a penalty verses an incentive payment so the results may not be directly applicable. However, in the case of Capital Gains, it is possible that students will not value the incentive money as much as they had previously valued the hopeful expectations of their parents or even their own sense of self respect. After students are in an economic exchange mindset they will understand the benefit of good behavior in explicit financial terms. If a student decides that the extra effort is not worth $1,500, she may decide to put in even less effort than she did prior to the program. If students remain in an economic exchange mindset, a later need to remove the financial incentive could leave students even less motivated than they were before the incentive system.

Though there are risks, I am happy to see programs like Capital Gains attempting to improve our nation’s educational system. The current system is failing our children, especially those from disadvantaged backgrounds. It is time to try something new. Thank you Professor Fryer.