Papers Flashcards
“When and Why Incentives (Don’t) Work to Modify Behavior” by Uri Gneezy, Stephan Meier, and Pedro Rey-Biel
a) Summarize the background, the research question and the design of the two field studies in the paper.
b) Discuss When and Why Incentives (Don’t) Work to Modify Behavior
Question a)
The article “When and Why Incentives (Don’t) Work to Modify Behavior” by Uri Gneezy, Stephan Meier, and Pedro Rey-Biel examines the complex relationship between extrinsic incentives and intrinsic motivation. The authors explore how monetary incentives can sometimes undermine intrinsic motivations, leading to unintended consequences. They discuss various field studies across domains such as education, public goods contributions, and lifestyle changes to illustrate these dynamics.
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In the context of education, the authors analyze field studies where monetary incentives are provided to students to improve academic outcomes. These studies investigate whether financial rewards for actions like increased school attendance, reading, or better grades effectively enhance educational performance. The research questions focus on understanding if these extrinsic incentives lead to sustained academic improvement or if they potentially diminish students’ intrinsic interest in learning over time. The design of these studies typically involves implementing financial incentive programs in educational settings and measuring their impact on student behavior and performance.
Regarding contributions to public goods, the authors examine field studies that assess the effect of monetary incentives on behaviors such as blood donations or charitable contributions. The research questions aim to determine whether introducing financial rewards increases participation in these prosocial activities or if it adversely affects individuals’ intrinsic willingness to contribute. The design of these studies often includes offering monetary incentives to participants for engaging in public good activities and observing changes in contribution levels compared to control groups without incentives.
They also examines the use of monetary incentives in helping individuals change their lifestyles. The authors explore how financial rewards can influence behaviors such as smoking cessation, weight loss, and increased physical activity. The research questions in these studies focus on whether extrinsic incentives can effectively promote healthier lifestyle choices and whether these changes are sustainable once the incentives are removed. The design of these studies typically involves offering monetary rewards to participants who achieve specific health-related goals and monitoring their progress during and after the intervention to assess both immediate and long-term effects. Through these analyses, the authors highlight the complexities of using extrinsic incentives to modify behavior and emphasize the importance of considering potential interactions with intrinsic motivations when designing interventions.
Question b)
They argue that while extrinsic incentives, such as monetary rewards, can effectively influence behavior, they may also conflict with intrinsic motivations, leading to unintended consequences. This conflict can manifest in several ways:
Perception of the Task: Introducing monetary incentives can alter how individuals perceive a task. For instance, if a task was previously undertaken for its inherent satisfaction, adding a financial reward might shift the perception to viewing it as a means to an end. This shift can diminish the intrinsic enjoyment derived from the activity.
Crowding Out Intrinsic Motivation: Extrinsic incentives might undermine intrinsic motivation—a phenomenon known as “crowding out.” For example, offering payment for blood donations could reduce the altruistic motivation to donate, as individuals may feel that the act is now transactional rather than charitable.
Short-Term vs. Long-Term Effects: While extrinsic incentives can yield immediate behavioral changes, they might not lead to sustained behavior once the incentives are removed. For example, students might study harder when offered monetary rewards for good grades, but this effort may decline if the rewards are discontinued, especially if their intrinsic interest in learning was weakened during the incentivized period.
Encourage Plant-Based Diets with Choice Architecture, Not Bans or Marketing Stunts, by Christina Gravert
a) Summarize the background, the research question.
b) Discuss why bans can be bad.
Question a)
In the article “Encourage Plant-Based Diets with Choice Architecture, Not Bans or Marketing Stunts,” Christina Gravert discusses strategies to promote plant-based eating without alienating consumers. She critiques approaches like temporary all-plant-based restaurant transformations, which can lead to self-selection and backfire effects, as seen in Burger King’s Copenhagen experiment, where it meat was banned for short period to instead introduce and try out their non-meat alternatives. Instead, Gravert advocates for integrating plant-based options into existing menus using choice architecture to subtly guide consumer choices. She argued that Burger King during that period got one extra customer in her, but lost another her friend who wanted a smoked bacon burger when walking home from a night out. Instead he chose McDonalds. Using choice architecture aims to make plant-based foods more accessible and appealing, encouraging a broader audience to reduce meat consumption without feeling restricted, in contrast to a full ban.
Question b)
The article “Encourage Plant-Based Diets with Choice Architecture, Not Bans or Marketing Gimmicks” by Christina Gravert discusses several problems with bans as a strategy for encouraging plant-based diets. The key issues with bans include:
- Psychological Reactance and Resistance
When people feel that their choices are being restricted, they may react negatively by resisting or opposing the ban.
Consumers may actively seek out the banned option elsewhere, reducing the intended impact of the intervention. - Self-Selection and Limited Reach
A ban might only attract consumers who are already inclined to follow the behavior, rather than encouraging a broader shift in habits.
For example, in the Burger King Copenhagen case, turning the restaurant fully plant-based mainly appealed to those already interested in plant-based food, while others who preferred meat-based options simply went to a different restaurant. - Unintended Consequences
A ban can lead to customers compensating by consuming the restricted product later or in higher quantities elsewhere.
If an institution, such as a workplace cafeteria, removes all meat options, employees may opt for meat-heavy meals outside work, negating any reduction in meat consumption. - Alienating Potential Adopters
A ban can make plant-based eating feel like an imposition rather than an attractive alternative.
Instead of fostering curiosity and gradual adoption, it risks making people feel forced into compliance, which may reduce long-term behavior change. - Practical and Economic Barriers
Businesses may struggle to implement bans if customers are not yet fully on board with the change.
Bans might lead to financial losses if they drive away a significant portion of customers who are unwilling to switch to plant-based options. - Better Alternative: Choice Architecture
Rather than banning certain foods, making plant-based options more available and appealing through strategic menu placement, portioning, and framing can subtly guide consumer behavior without triggering resistance.
Providing more plant-based default options or making plant-based meals the easier choice (e.g., a default side dish) encourages adoption without making customers feel coerced.
Conclusion
Bans often backfire because they provoke resistance, limit consumer reach, and create unintended behavioral consequences. A more effective approach is to use choice architecture, where plant-based options are integrated into menus in a way that encourages gradual, voluntary adoption rather than imposing restrictions.
Priceless behaviours: behavioural implications, unintended consequences and spillover effects of pricing policies, by Mario Mazzocchi and Beatrice Biondi
a) Summarize the background, the research question.
b) Discuss why priceless behaviours are good, and why previous actions are worse.
Question a)
Background
The paper “Priceless Behaviors” by Mario Mazzocchi and Beatrice Biondi examines the behavioral implications, unintended consequences, and spillover effects of pricing policies. It explores how price interventions—such as taxes and subsidies—are used to influence consumer behavior, particularly in the context of encouraging healthier or more sustainable choices. The discussion builds on concepts from behavioral economics, particularly the interaction between price signals and choice architecture interventions (nudges).
While traditional economic models assume that price changes directly affect consumption through rational decision-making, the paper highlights how behavioral biases—such as loss aversion, reference pricing, mental accounting, and habit formation—can significantly alter consumer responses. These biases can lead to unintended consequences, such as compensatory behaviors where consumers shift spending to non-taxed unhealthy alternatives.
For example, taxation on plastic bags may initially reduce consumption, but over time, the effectiveness of the tax may decline as consumers adapt to the price increase. Similarly, fiscal interventions like sin taxes (on sugary drinks, tobacco, and alcohol) are often more effective than subsidies because people respond more strongly to losses than to gains.
Research Question
The central research question explored in the paper is:
How do price policies (such as taxes and subsidies) influence consumer behavior, and what unintended consequences or spillover effects do they generate?
How can price interventions be enhanced by choice architecture (nudging) to maximize their effectiveness in achieving socially desirable outcomes (e.g., better health, sustainability, or reduced consumption of harmful goods)?
The study investigates whether small financial interventions (such as minor price changes) alone are sufficient to drive long-term behavioral change, or whether complementary non-price interventions—like increasing the saliency of the tax or using nudges—are necessary to enhance effectiveness.
The paper presents two real-world field studies to illustrate the behavioral effects of price interventions:
Plastic Bag Levy in Ireland
In 2002, Ireland introduced a €0.15 levy on plastic bags to reduce environmental waste. This was later increased to €0.22 in 2007.
The initial tax was highly effective, leading to a 90% reduction in plastic bag use. However, over time, plastic bag consumption increased again.
The study highlights that price alone was not enough to sustain long-term behavior change. The effectiveness of the tax declined as the “shock” of the intervention wore off.
Key Insight: The initial impact of a tax can erode over time unless supported by additional nudges or reinforcement measures.
Anti-Charity Experiment in Naples, Italy
A supermarket in Naples introduced an anti-charity nudge to reduce single-use bag consumption.
Customers who purchased a single-use biodegradable bag (€0.10 each) saw their money donated to Juventus Football Club, which is widely disliked in Naples.
Conversely, if customers brought their own reusable bag, the store transferred the same amount (€0.10) to a children’s charity instead.
Result: In just four weeks, the purchase of single-use bags dropped by 13% (around 40 fewer bags per day).
Key Insight: Behavioral nudges (even without changing the price) can effectively modify behavior by leveraging emotional incentives (e.g., dislike for a football team) alongside monetary mechanisms.
Conclusion
The study demonstrates that while pricing interventions (taxes, subsidies) can influence consumer choices, their effectiveness depends heavily on behavioral factors. If consumers do not perceive a tax as meaningful, they may revert to old habits or find alternative ways to offset the impact.
The two field studies illustrate that making interventions more salient—such as linking price changes to a cause people care about (as seen in Naples) or reinforcing the policy with additional public awareness efforts (as seen in Ireland)—can significantly improve outcomes.
Thus, a combination of economic incentives and behavioral nudges is often the most effective approach in modifying consumer behavior in the long run.
Question b)
Why “Priceless Behaviors” Are Better and Why Traditional Pricing Policies Have Limitations
The concept of “Priceless Behaviors” refers to the idea that non-monetary incentives and behavioral nudges can be more effective in shaping consumer behavior than purely economic price-based interventions such as taxes or subsidies. The paper “Priceless Behaviors” by Mazzocchi and Biondi critiques traditional pricing policies and explains why behavioral interventions (such as nudges) often work better. Below is a discussion of why priceless behaviors are good and why previous pricing-based policies are less effective or even problematic.
Why Priceless Behaviors Are Good
They Leverage Behavioral Biases to Influence Decisions Effectively
Priceless behaviors recognize that people do not always act rationally in response to price changes.
Behavioral interventions like nudges, framing, and saliency enhancements work with human psychology rather than assuming people will respond rationally to higher prices or financial rewards.
Example: The Naples anti-charity experiment, where people avoided buying plastic bags not because of the cost (€0.10) but because they disliked the idea of their money supporting an unwanted cause (Juventus FC).
They Create Long-Term Behavioral Change
Traditional price-based interventions often lose their effectiveness over time as people adapt to them.
In contrast, priceless behaviors build habits and social norms that lead to sustained change without the need for continuous price adjustments.
Example: The Irish plastic bag levy initially reduced plastic bag consumption by 90%, but usage later increased as the tax lost saliency. If paired with social pressure or awareness campaigns, the change might have lasted longer.
They Avoid the “Crowding Out” Effect
Monetary incentives can reduce intrinsic motivation for socially beneficial behaviors.
When people are paid or penalized for certain actions, they often stop doing them for moral reasons and instead start seeing them as purely financial transactions.
Example: If a small tax on unhealthy foods is introduced, some consumers might feel that paying the tax “compensates” for their bad choice rather than encouraging them to eat healthier.
They Can Be More Cost-Effective Than Taxes or Subsidies
Instead of raising prices (which can be unpopular) or subsidizing healthy behaviors (which requires government spending), priceless behaviors use psychological incentives that cost little to implement.
Example: Making healthier food more visible in stores (placing fruits at eye level) or defaulting people into better choices (e.g., serving smaller portion sizes unless a larger one is requested) costs nothing but can change behavior significantly.
They Reduce Social Resistance and Backlash
Many people resist taxes and bans because they feel their freedom of choice is being taken away.
Nudges and other non-monetary strategies allow people to feel like they are choosing their behavior rather than being forced into it.
Example: Rather than banning soda, a government might place warnings on sugary drinks or reduce their size in vending machines, nudging people toward healthier choices without limiting their freedom.
Why Previous Price-Based Actions Are Worse
Price Elasticity Varies, So Taxes Don’t Work for Everyone
The impact of a tax depends on how much consumers care about price changes.
Some people will reduce their consumption when a tax is introduced, but others will continue buying the product, even at a higher cost.
Example: Heavy smokers often do not quit even when cigarette taxes increase because they are addicted. Instead, they buy cheaper brands or stronger cigarettes, reducing the intended health benefits.
Unintended Consequences: Consumers May Shift to Worse Alternatives
Price interventions can lead to compensatory behaviors, where consumers substitute one bad choice for another.
Example: In Mexico, a soda tax reduced soft drink consumption, but many people simply switched to cheaper, non-taxed alternatives that were still unhealthy, leading to no net improvement in health.
Hidden Taxes Lose Their Effectiveness
If a tax is not salient (clearly visible), many consumers don’t even notice it, reducing its impact.
Example: In the U.S., excise taxes on alcohol are often included in the final price but not displayed on the shelf, making them less effective than a tax that is explicitly stated upfront.
Subsidies Can Backfire by Encouraging More Overall Consumption
Giving financial incentives for good behavior (like discounts on healthy food) doesn’t always work as intended.
Example: A New Zealand study found that when healthy foods were subsidized, people bought more of them, but they also used the saved money to buy more unhealthy foods, leading to no overall health improvement.
They Can Be Regressive and Disproportionately Affect Low-Income Consumers
Taxes on unhealthy goods, like sugary drinks or cigarettes, tend to hit lower-income individuals harder because they spend a larger share of their income on these goods.
While wealthier consumers can easily afford the higher prices, lower-income consumers either continue purchasing and suffer financially or switch to lower-quality versions of the same product.
Example: Studies on tobacco taxes show that while some smokers quit, many just smoke fewer but stronger cigarettes, maintaining their nicotine intake.
Conclusion
While traditional pricing policies (taxes and subsidies) can influence behavior, they often have limitations and unintended consequences. Priceless behaviors—such as nudges, framing, and saliency enhancements—are often more effective because they work with human psychology rather than relying on price sensitivity alone.
The best approach is often a combination of both: using price-based measures alongside behavioral nudges to maximize effectiveness. For example, making a soda tax highly visible on price tags and earmarking the tax revenue for public health programs can reinforce the intended effect.
In the end, the key insight is that people respond more to psychological signals than to price changes alone, which is why priceless behaviors are a smarter and more sustainable way to drive positive social change.
PSYCHOLOGY AND ECONOMICS: EVIDENCE FROM THE FIELD by Stefano DellaVigna
a) Summarize the research question and the experimental design of the main study in this paper.
b) Discuss which empirical evidence and how some might exploit behavioral biases to their advantage.
Question a)
In “Psychology and Economics: Evidence from the Field,” Stefano DellaVigna investigates how individuals deviate from traditional economic models in real-world settings. He looks into the equations, why they do not make sense with real world behavior. The study focuses on three primary deviations:
Non-standard preferences: Examining issues like self-control problems, reference dependence in risk preferences, and social preferences.
Non-standard beliefs: Investigating phenomena such as overconfidence, the law of small numbers, and projection bias.
Non-standard decision-making: Exploring factors like limited attention, menu effects, persuasion, social pressure, and the influence of emotions.
DellaVigna employs a survey methodology, analyzing empirical evidence from various field studies across multiple domains, including consumption, finance, crime, voting, charitable giving, and labor supply. The research synthesizes findings from these studies to illustrate how psychological factors influence economic behavior outside of controlled laboratory environments. Additionally, the paper discusses how rational actors—such as firms, employers, CEOs, investors, and politicians—respond to these behavioral anomalies. It also summarizes common empirical methodologies used in psychology and economics and considers the conditions under which experience and market interactions may mitigate the impact of these non-standard behaviors.
Question b)
Empirical Evidence from Field Studies
DellaVigna supports these psychological insights with empirical evidence from field experiments and observational studies across various domains, including:
Consumption, Finance, Crime, Voting, Charitable Giving, How non-monetary incentives and psychological contracts affect workplace performance, Response of Rational Actors (Firms, Employers, Politicians)
The paper discusses how rational actors (e.g., firms, policymakers, and employers) exploit behavioral biases to their advantage:
Companies design contracts with hidden costs, manipulate default options, and use targeted advertising.
Politicians and policymakers use framing techniques to shape public perception.
Employers leverage psychological incentives to enhance worker productivity.
Implications and Market Corrections
The paper explores when market forces and experience help individuals overcome these biases and when they persist.
It discusses policy implications, such as nudges and regulations to mitigate behavioral inefficiencies.
It also highlights the importance of integrating psychological insights into economic models to improve predictions and interventions.
Can Behavioral Interventions Be Too Salient? Evidence from Traffic Safety Messages, by Jonathan D. Hall,1,2 Joshua Madsen
a) Summarize the research question and the experimental design of the main study in this paper.
b) Outline the dissucsion
c) What could an alternative solution look like?
Question A
Research Question
The study investigates whether behavioral interventions can be too salient, leading to unintended negative consequences. Specifically, it examines whether displaying traffic fatality messages on highway dynamic message signs (DMS) increases crashes instead of reducing them. The research questions whether these highly salient, negatively framed messages distract drivers, thereby impairing their ability to focus on driving safely.
Experimental Design
The study exploits a natural experiment in Texas, where traffic fatality messages are displayed on DMS one week per month. Using a difference-in-differences approach, the researchers compare crash rates during campaign weeks (when fatality messages are shown) to other weeks in the same month from 2010 to 2017. The analysis is conducted at the road segment-hour level, controlling for weather, holidays, and time-of-day factors. Placebo tests (using pre-treatment data and upstream crash analysis) confirm that the increase in crashes during campaign weeks is due to the fatality messages and not inherent risk factors. The study finds a 4.5% increase in crashes within 10 km of the DMS during campaign weeks, suggesting that these messages distract drivers rather than improving road safety.
Question b)
- Evidence that Fatality Messages Distract Drivers
The study provides evidence that fatality messages are too salient, leading to driver distraction.
The negative effect is stronger when messages are more salient or when drivers’ cognitive loads are high.
However, in low-complexity environments or when fatality counts are low, these messages slightly reduce crashes.
2. Impact on Crashes and Social Costs
4.5% increase in crashes within 10 km of a DMS displaying fatality messages.
Estimated 2,600 additional crashes per year in Texas, possibly causing 16 extra fatalities annually.
$380 million in social costs for Texas alone.
National extrapolation: Fatality messages could contribute to 17,000 crashes, 104 fatalities, and $2.5 billion in costs per year across the U.S.
3. Variation in Effects Across States
Differences in how frequently fatality messages are displayed affect their impact:
Illinois (constant display) may experience less severe effects.
Colorado (one day per week display) may see worse effects due to shock factor.
The size of the fatality count displayed also affects impact:
Texas reports larger numbers than most states, potentially increasing distraction.
If the absolute number matters, other states might see weaker effects.
If relative size matters (fatalities per capita), the results could be more generalizable.
Question c)
The ethically correct solution would be to redesign traffic safety interventions to avoid causing harm while still promoting safer driving behavior. Based on the study’s findings, ethical recommendations include:
Remove or Modify Fatality Messages
Cease the use of highly salient fatality messages, as they increase crashes.
Replace with simpler, non-threatening messages (e.g., “Drive Safely” or “Stay Alert”).
Use positive reinforcement instead of fear-based messaging.
Alternative Messaging Approaches
Implement real-time safety alerts (e.g., weather conditions, crash risks, speed limit reminders).
Provide personalized driver feedback through apps or vehicle dashboards rather than road signs.
Display local accident statistics in safer, non-distracting locations (e.g., rest areas, gas stations).
