1. Some of us have too many bad habits, such as smoking, and too few good ones, such as exercising Some of us have too many bad habits, such as smoking, and too few good ones, such as exercising Could incentives be used to “improve” peoples’ habit formation—reducing the bad ones and increasing the good ones? Could incentives be used to “improve” peoples’ habit formation—reducing the bad ones and increasing the good ones? “Behavioral Interventions” “Behavioral Interventions” I will present some success in increasing positive habits—and a challenge of reducing bad habits. I will present some success in increasing positive habits—and a challenge of reducing bad habits. Incentives and Habits

2. Part 1: reinforcing good habits, with Gary Charness (UCSB) Part 1: reinforcing good habits, with Gary Charness (UCSB) People don’t exercise enough - bad for health and obesity People don’t exercise enough - bad for health and obesity Can we use incentives to make people go more frequently to the gym? Can we use incentives to make people go more frequently to the gym? – In the short run (when the incentives are present) – In the long run (after the incentives are removed)

3. 120 students - 40 in each of 3 treatments 120 students - 40 in each of 3 treatments Participants were invited to an experimental lab Participants were invited to an experimental lab Read a short article describing the importance of exercising and answered some questions Read a short article describing the importance of exercising and answered some questions They were invited to come back to the lab one week later to answer some more questions They were invited to come back to the lab one week later to answer some more questions Each received $25 for the two times they came to the lab Each received $25 for the two times they came to the lab For the control group, that was all we did For the control group, that was all we did

4. In the other two groups, we told participants that they must go to the gym at least once during the week In the other two groups, we told participants that they must go to the gym at least once during the week We got the data about the visits from the gym (computerized) We got the data about the visits from the gym (computerized) Upon arriving back to the lab in the second week, people were randomly assigned to one of two groups Upon arriving back to the lab in the second week, people were randomly assigned to one of two groups – Incentives for one week – Incentives for five weeks

5. For the one week group - that was the end of the study For the one week group - that was the end of the study For the four weeks group - we offered extra $100 to go to the gym at least 8 times during the following 4 weeks For the four weeks group - we offered extra $100 to go to the gym at least 8 times during the following 4 weeks To sum—three treatments: To sum—three treatments: – No incentives – Incentives for one week – Incentives for one + four weeks

6. Two competing hypotheses First hypothesis: Crowding out First hypothesis: Crowding out Empirical findings suggest that sometimes paying people to do an activity might Empirical findings suggest that sometimes paying people to do an activity might – help in the short run (while the incentives are present) – but be detrimental in the long run - once the incentives are removed People who receive $100 to go to the gym 8 times might go more frequently while the incentives are present, but once the incentives are removed will go less frequently than the control group People who receive $100 to go to the gym 8 times might go more frequently while the incentives are present, but once the incentives are removed will go less frequently than the control group

7. Second hypothesis: habit formation Second hypothesis: habit formation Becker and Murphy Becker and Murphy – marginal utility today is positively correlated with historical consumption – changes today can have small effect in the short run but increasingly large effects in the long run By paying people to go to the gym for few weeks we increase the marginal utility of future visits By paying people to go to the gym for few weeks we increase the marginal utility of future visits

14. Implications - e.g., education Implications - e.g., education Should we pay kids for success in exams? Should we pay kids for success in exams? Some recent findings show that paying students help in the short run (when the incentives are present) Some recent findings show that paying students help in the short run (when the incentives are present) But what are the long run influences of this But what are the long run influences of this – Destroy intrinsic motivation? – “I learn because I’m paid and not because it is important/fun/…?”

15. Bad habits, with Harriet de Wit (Chicago) Bad habits, with Harriet de Wit (Chicago) Cigarette smoking is a major health problem Cigarette smoking is a major health problem Over the years, researchers have used different methods to encourage and motivate abstinence Over the years, researchers have used different methods to encourage and motivate abstinence Examples include: Examples include: – individual and group counseling – pharmacological interventions – inpatient and outpatient treatments – support groups – workplace interventions – family therapies

16. Many used rewards and punishment to influence voluntary behavioral adaptations Many used rewards and punishment to influence voluntary behavioral adaptations Assume: Smoking behavior could be changed using extrinsic incentives Assume: Smoking behavior could be changed using extrinsic incentives The background theory--operant conditioning (Skinner, 1938, 1972) The background theory--operant conditioning (Skinner, 1938, 1972) The idea is that behavior is learned and reinforced by interaction with environmental contingencies The idea is that behavior is learned and reinforced by interaction with environmental contingencies Because behavior is controlled by its consequences, it can be changed by changing its consequences Because behavior is controlled by its consequences, it can be changed by changing its consequences

17. First step: show that people behave differently than starved pigeons First step: show that people behave differently than starved pigeons In the first study we plan to extend the findings of Gneezy and Rustichini (2000) to the study of reinforcement of smoking abstinence using monetary incentives In the first study we plan to extend the findings of Gneezy and Rustichini (2000) to the study of reinforcement of smoking abstinence using monetary incentives Show(?) that monetary incentives contingent on smoking cessation may actually interfere with future attempts to abstain Show(?) that monetary incentives contingent on smoking cessation may actually interfere with future attempts to abstain

18. The study Recruit cigarette smokers who are not currently planning to quit Recruit cigarette smokers who are not currently planning to quit Three treatments consisting of two parts, each part consists of three days Three treatments consisting of two parts, each part consists of three days All participants receive monetary compensation for participating All participants receive monetary compensation for participating They are all asked and encouraged to abstain from smoking during the two parts of the study They are all asked and encouraged to abstain from smoking during the two parts of the study

19. Part 1 (three days) Treatment 1: Participants will not receive additional contingent monetary incentives Treatment 1: Participants will not receive additional contingent monetary incentives Treatment 2: Participants will be paid a small ($1) compensation for every day in which they will not smoke. Treatment 2: Participants will be paid a small ($1) compensation for every day in which they will not smoke. Treatment 3: Same as treatment 2, but with a large monetary compensation ($20) Treatment 3: Same as treatment 2, but with a large monetary compensation ($20)

20. Part 2 (three days) This part will take place four days after the end of part 1 This part will take place four days after the end of part 1 In this part, all participants will be asked and encouraged not to smoke In this part, all participants will be asked and encouraged not to smoke No additional incentives will be used No additional incentives will be used

21. Predictions - Part 1: We predict that in part 1, treatment 3 will be the most successful in terms of participants not smoking We predict that in part 1, treatment 3 will be the most successful in terms of participants not smoking In contrast with Skinner’s operant conditioning model, we predict that treatment 1 will be more successful than treatment 2. In contrast with Skinner’s operant conditioning model, we predict that treatment 1 will be more successful than treatment 2.

22. Predictions – part 2: We predict that treatment 1 will be more effective than the other two treatments We predict that treatment 1 will be more effective than the other two treatments The reason is that participants, who were paid before, will not refrain from smoking when this is not extrinsically rewarded The reason is that participants, who were paid before, will not refrain from smoking when this is not extrinsically rewarded Note that this is of great relevance to the debate regarding the long term effect of incentives on smoking Note that this is of great relevance to the debate regarding the long term effect of incentives on smoking Even incentive programs that are successful while the incentives are present might be counterproductive once the incentives are removed Even incentive programs that are successful while the incentives are present might be counterproductive once the incentives are removed