When and Why Incentives (Don't) Work to Modify Behavior (original) (raw)
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Behavioral Economics and Psychology of Incentives
Monetary incentives can backfire while nonstandard interventions, such as framing, can be effective in influencing behavior. I review the empirical evidence on these two sets of anomalies. Paying for inherently interesting tasks, paying for prosocial behavior, paying too much, paying too little, and providing too many options can all be counterproductive. At the same time, proper design of the decision-making environment can be a potent way to induce certain behaviors. After presenting the empirical evidence, I discuss the relative role of beliefs, preferences, and technology in the anomalous impacts of incentives. I argue that inference, signaling, loss aversion, dynamic inconsistency, and choking are the primary factors that explain the data.
Economic Incentives and Social Preferences: Substitutes or Complements?
Journal of Economic Literature, 2012
Explicit economic incentives designed to increase contributions to public goods and to promote other pro-social behavior sometimes are counterproductive or less effective than would be predicted among entirely self-interested individuals. This may occur when incentives adversely affect individuals' altruism, ethical norms, intrinsic motives to serve the public, and other social preferences. The opposite also occurs—crowding in —though it appears less commonly. In the fifty experiments that we survey, these effects are common, so that incentives and social preferences may be either substitutes (crowding out) or complements (crowding in). We provide evidence for four mechanisms that may account for these incentive effects on preferences: namely that incentives may (i) provide information about the person who implemented the incentive, (ii) frame the decision situation so as to suggest appropriate behavior, (iii) compromise a control averse individual's sense of autonomy, and (...
Monetary Incentives: Usually Neither Necessary Nor Sufficient?
2006
Abstract: Read (2005), in The Journal of Economic Methodology, took our target article in Behavioral and Brain Sciences (Hertwig & Ortmann 2001) as one point of departure to question the usefulness of monetary incentives for experimental work. In making his case, he misrepresents our analysis, and continues the unfortunate ritual of opportunistic sampling of evidence. As in our target article, we call for an empirical analysis of the impact of monetary incentives.
Psychological foundations of incentives
European Economic Review, 2002
During the last two decades economists have made much progress in understanding incentives, contracts and organisations. Yet, they constrained their attention to a very narrow and empirically questionable view of human motivation. The purpose of this paper is to show that this narrow view of human motivation may severely limit understanding the determinants and effects of incentives. Economists may fail to understand the levels and the changes in behaviour if they neglect motives like the desire to reciprocate or the desire to avoid social disapproval. We show that monetary incentives may backfire and reduce the performance of agents or their compliance with rules. In addition, these motives may generate very powerful incentives themselves. JEL-Classification: J41, C91, D64
Public Opinion Quarterly, 2009
This study revisits the issue of monetary incentive effects utilizing data from a mail survey sent to a random sample of adults across the United States regarding preferences for fuel ethanol. The results reported here are consistent with those found in the literature regarding the effect of incentives on response rates: they improved them, with prepaid incentives performing relatively better. We also found that state of residence was significantly correlated with choosing whether to respond to a survey. Regarding the effect of incentives on sample composition, we found that incentives tended to bias the sample in favor of less educated respondents, and tended to attract respondents less familiar with the survey subject. Finally, results indicate that incentives had very little effect on item nonresponse. Instead, item nonresponse was driven by education level, gender, and familiarity with the survey subject. However, combining the findings on sample composition with those of item nonresponse, it appears that the use of incentives indirectly affects item nonresponse by recruiting relatively more respondents that are less educated and/or less familiar with the survey topic, who are then less likely to respond to all questions.
Self-determination and incentives: a new look at the crowding out effect
In economics, as well as in psychology, the crowding out effect is considered both as based on strong empirical evidence and as an artifact. We present the different ways economists and psychologists discuss the existence of this effect and propose an integrative solution based on the self-determination theory.
Revisiting the Effects of Economic Incentives on Motivation
Theoretical Economics Letters, 2012
This paper presents a formal framework for modeling the effects of economic incentives on motivation. While economic models represent the utilities from monetary incentives and private benefits in an additive form, studies in psychology show that extrinsic and intrinsic motivation are non-additive and that there exists a continuum between the two. To accommodate for possible interaction effects, a non-additive probability model and evidence theory have been used in the principal-agent set-up. The model produces results consistent with prior evidence presented in social psychology studies.
Extrinsic Motivators and Incentives: Challenge and Controversy
2000
This article reviews the literature and provides examples of extrinsic motivators and incentives being used in public schools to decrease dropout rates, increase attendance, and increase academic achievement. The use of incentives has grown in favor as a way to increase student achievement, intrinsic motivation, self-worth, and retention. Certain characteristics must be present in incentives to ensure success in motivating students. These include establishing definite patterns of change in behavior, melding with students' interests, and having consistent standards of implementation. Students will respond favorably to rewards if they feel there is a reasonable chance of success, they are convinced that the personal risks are not-overwhelmingi and they believe that the product or reward is-worth the effort needed to succeed. Educators do not universally support incentives in education. Many believe that the use of extrinsic motivators undermines individuals' intrinsic motivation. Evidence clearly shows that extrinsic rewards can either enhance or reduce interest in an activity, depending on how they are used. Despite continued controversy, incentive programs can serve a valuable function in schools, providing an additional source of motivation and support for students. (Contains 45 references.) (SM) Reproductions supplied by EDRS are the best that can be made from the original document.
Can Different Incentives Influence Participants’ Choice? Elizabeth Mullen Carnegie Mellon University
2007
Abstract Monetary incentives are used to encourage people to perform a variety of different actions. Increasingly, they are used to encourage actions that are directly beneficial to individuals, such as engaging in healthy behaviors or quitting addictive drugs. Interestingly, however, there is little research comparing the effectiveness of different types of incentive schemes. The current project compares the effectiveness of incentive schemes that offer sure payments versus lotteries of equal expected value.