Case on Incentives to Exercise

Only available on StudyMode
  • Download(s) : 74
  • Published : March 14, 2013
Open Document
Text Preview
http://www.econometricsociety.org/

Econometrica, Vol. 77, No. 3 (May, 2009), 909–931 INCENTIVES TO EXERCISE GARY CHARNESS University of California at Santa Barbara, Santa Barbara, CA 93106-9210, U.S.A. URI GNEEZY Rady School of Management, University of California at San Diego, La Jolla, CA 92093-0553, U.S.A.

The copyright to this Article is held by the Econometric Society. It may be downloaded, printed and reproduced only for educational or research purposes, including use in course packs. No downloading or copying may be done for any commercial purpose without the explicit permission of the Econometric Society. For such commercial purposes contact the Office of the Econometric Society (contact information may be found at the website http://www.econometricsociety.org or in the back cover of Econometrica). This statement must the included on all copies of this Article that are made available electronically or in any other format.

Econometrica, Vol. 77, No. 3 (May, 2009), 909–931

INCENTIVES TO EXERCISE BY GARY CHARNESS AND URI GNEEZY1
Can incentives be effective in encouraging the development of good habits? We investigate the post-intervention effects of paying people to attend a gym a number of times during one month. In two studies we find marked attendance increases after the intervention relative to attendance changes for the respective control groups. This is entirely driven by people who did not previously attend the gym on a regular basis. In our second study, we find improvements on health indicators such as weight, waist size, and pulse rate, suggesting the intervention led to a net increase in total physical activity rather than to a substitution away from nonincentivized ones. We argue that there is scope for financial intervention in habit formation, particularly in the area of health. KEYWORDS: Exercise, field experiment, habit formation, incentives.

INTRODUCTION

ON SEPTEMBER 18, 2006, New York Mayor Michael Bloomberg announced a new policy he called conditional cash transfers. He said that the plan was designed to address the simple fact that the stress of poverty often causes people to make decisions—to skip a doctor’s appointment or to neglect other basic tasks—that often only worsen their long-term prospects. Conditional cash transfers give them an incentive to make sound decisions instead. The intention was to provide conditional cash transfers to families of at-risk youngsters to encourage parents and young people to engage in healthy behavior, to stay in school, stay at work, and stay on track to rise out of poverty. Bloomberg also argued that the return on such investments is necessarily delayed, but that this is a clear path out of the cycle of poverty. Bloomberg’s last comment is about changing peoples’ habits. He believes that the cost (estimated at $42 billion) of the program is worth the benefit of this improvement in habits. Whether or not Bloomberg is correct in his assessment, an underlying issue is whether we can construct mechanisms to induce better decision-making. As DellaVigna and Malmendier (2006) have nicely demonstrated, people make poor choices regarding membership options at a health club: people who choose to pay a flat monthly fee for membership in a gym pay more than if they would have chosen to pay a fixed cost per visit. So perhaps the incentives to exercise that are already present are ineffective or insufficiently salient. But can we improve on these existing incentives? Can we go beyond the mere 1 We acknowledge helpful comments from Yan Chen, Martin Dufwenberg, Guillaume Fréchette, Jacob Goeree, Ulrike Malmendier, Uri Simonsohn, and Priscilla Williams, as well as seminar audiences at the Stanford Institute of Theoretical Economics, the Santa Barbara Conference on Communication and Incentives, the ESA meeting in Tucson, the ESA meeting in Lyon, CIDE in Mexico City, and Harvard University. Special thanks go to a co-editor and three anonymous referees, who suggested...
tracking img