Lecture 6

Question 1

+incentives for quitting smoking?

Negative incentives for quitting smoking?

Answer 1

• Cheaper insurance premiums
• “Quit to Win” lottery contests

$2 excise tax

Question 2

+commitments for quitting smoking?

• commitments?

Answer 2

Cash prize to quit

Deposit contract worth 6
months’ salary

Question 3

Major cons(2) of commitment based interventions?

Answer 3

1) Low participation rate –
contingent on smokers
being in the preparation
stage of behavioral change
2) Expensive (if carrots are big)

Question 4

Majoer Pro of taxes?

Answer 4

An excise tax affects
everyone regardless of
their stage of change.

Question 5

from an SES perspective, differentiate taxes v precommitment-based interventions?

Answer 5

Low SES people are more responsive v High SES people more responsive

Question 6

Pros of subsidies of healthy foods?

Answer 6

1) less risk of sending wrong message
2) Price discounts are already used by retailers
3) No need to pay a referee to check compliance

Question 7

Consumers view subsidies vs.
taxes differently (asymmetry in price elasticity). Why?

Answer 7

Loss aversion says that price elasticities will be asymmetric.

Consumers will dislike price increases twice as much as the same price cut.

Loss averse customers will reduce their consumption more when prices rise, compared to
increasing purchases when prices
fall.

Question 8

Beware of monetizing behaviors when?

Answer 8

1) Pro-social behaviors (pick up kids on time)
2) Altruistic act (paying money removes teh vituous halo)
3) Paying people to do things they already enjoy (turns it into a chore)