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Incentivizing Behavioral Change: The Role of Time Preferences

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  • Dizon-Ross, Rebecca
  • Aggarwal, Shilpa
  • Zucker, Ariel

Abstract

How should the design of incentives vary with agent time preferences? We develop two predictions. First, “bundling†the payment function over time – specifically by making the payment for future effort increase in current effort -- is more effective if individuals are impatient over effort. Second, increasing the frequency of payment is more effective if individuals are impatient over payment. We test the efficacy of time-bundling and payment frequency, and their interactions with impatience, using a randomized evaluation of an incentives program for exercise among diabetics in India. Consistent with our theoretical predictions, bundling payments over time meaningfully increases effort among the impatient relative to the patient. In contrast, increasing payment frequency has limited efficacy, suggesting limited impatience over payments. On average, incentives increase daily steps by 1,266 (13 minutes of brisk walking) and improve health.

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  • Dizon-Ross, Rebecca & Aggarwal, Shilpa & Zucker, Ariel, 2020. "Incentivizing Behavioral Change: The Role of Time Preferences," CEPR Discussion Papers 14751, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:14751
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    3. Andrej Woerner & Giorgia Romagnoli & Birgit M. Probst & Nina Bartmann & Jonathan N. Cloughesy & Jan Willem Lindemans, 2021. "Should Individuals Choose Their Own Incentives? Evidence from a Mindfulness Meditation Intervention," CESifo Working Paper Series 9494, CESifo.
    4. Werthschulte, Madeline, 2020. ""Pay-later" vs. "pay-as-you-go": Experimental evidence on present-biased overconsumption and the importance of timing," CAWM Discussion Papers 121, University of Münster, Münster Center for Economic Policy (MEP).
    5. Hirofumi Kurokawa & Shusaku Sasaki, 2023. "How Does Opt-in Work? A Field Experiment on Financial Incentives for Physical Activity," Discussion Papers in Economics and Business 23-01, Osaka University, Graduate School of Economics.
    6. Benjamin A. Olken, 2020. "Banerjee, Duflo, Kremer, and the Rise of Modern Development Economics," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(3), pages 853-878, July.
    7. Andrej Woerner, 2021. "Overcoming Time Inconsistency with a Matched Bet: Theory and Evidence from Exercising," CESifo Working Paper Series 9503, CESifo.
    8. Werthschulte, Madeline, 2023. "Present focus and billing systems: Testing ‘pay-as-you-go’ vs. ‘pay-later’," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 108-121.
    9. Mylène Lagarde & Carlos Riumallo Herl, 2023. "Stronger together: Group incentives and the demand for prevention," Tinbergen Institute Discussion Papers 23-0010/V, Tinbergen Institute.
    10. Woerner, Andrej, 2023. "Overcoming Time Inconsistency with a Matched Bet: Theory and Evidence from Exercising," VfS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" 277711, Verein für Socialpolitik / German Economic Association.
    11. de Walque, Damien, 2020. "The use of financial incentives to prevent unhealthy behaviors: A review," Social Science & Medicine, Elsevier, vol. 261(C).

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