INCENTIVES TO EXERCISE Gary Charness and Uri Gneezy

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

DOI: 10.3982/ECTA7416

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Student: Marco Santorsola

BEEM 126 Professor Ramon Cobo-Reyes University of Exeter, Feb 22nd 2016

RESEARCH QUESTION

Can financial incentives be used to develop or foster good habits?

Specifically can financial incentives be used to encourage subjects to exercise i.e. go to the gym? (strong intrinsic non-financial incentive are already in place)

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WHY IS THIS RESEARCH IMPORTANT?

Regular exercise combined with limited calorie intake is effective in reducing body mass (Andersen 1999), has psychological benefits (Bronwell 1995) and may reduce stress and anxiety (Kayman, Bruvold and Stern 1990)

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2003-2004 National Center for Health Statistic data show that 66% of American adults are overweight or obese (the highest level ever recorded). This increased obesity rate is correlated to an increase in inactivity

Andersen (1999) - barriers to exercise: lack of time, embarrassment of taking part in activity, inability to exercise vigorously and lack of enjoyment of exercise

CRITICISM - Volpp et al. (2008), Della Vigna and Malmendier (2006), Frey and Jegen (2001) found that financial incentives do not work in habit formation

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EXPERIMENTAL HYPOTHESES

Hypothesis 0 (= null hypothesis): Participants will visit the gym with the same frequency after the incentives are removed as before the incentives were introduced (i.e. financial incentives will have no effect at the end of the intervention)

Hypothesis 1: Participants will visit the gym less frequently after the incentives are removed as compared to before the incentives were introduced (i.e. a crowding-out effect is observed - providing an extrinsic motivation for a task may crowd out existing intrinsic motivation)

Hypothesis 2: Participants will visit the gym more frequently after the incentives are removed as compared to before the incentives were introduced (habit formation)

Note that crowding out and habit formation are not mutually exclusive 5

EXPERIMENTAL DESIGN

Experimental setup = 2 different field studies (university students were paid to attend the university’s gym)

2 groups + control group/each study

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STUDY 13 treatments - 120 subjects in total (students at the University of Chicago - each was given a leaflet about the benefits of exercising, consent form to track gym past, present and future gym attendance. There was no mention of fitness or exercise in the recruiting process.)

40 subjects - control group (participated in a marketing experiment - completely unrelated to exercise) - tot. = $0

80 subjects (in different sessions) were told that they would receive $25 to visit the gym at least once in the following week and come back to the lab to. At their return to the lab they were randomly assigned to one of two treatments.

40 subjects - One-time group (end of the experiment) - tot. = $25

40 subjects - Eight-times group (were promised an additional $100 for attending the gym at least eight times during the following four weeks and then returning to the lab) - tot. = $125

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STUDY 2 3 treatments - 168 (12 did not show up) subjects in total (first and second year UG at the University of California - consent form to track gym past, present and future gym attendance). All participants were paid $175 ($75,$50,$50) for biometric tests* (January, +1 month, +5 months) . They were required to keep an exercise log for five weeks and to complete a questionnaire - Study 2 was run to see whether it was the monetary payment, rather than the habit acquired, to cause effects on gym attendance.

39 subjects - Control group (as above - no further requirements) - tot.= $175

57 subjects - One-time group - required to visit the gym at least once in the following month - tot.= $175

60 subjects - Eight-times group - required to visit the gym at least eight times in the following month - tot.= $175

*individual’s height, weight, body fat %, waist, pulse and blood pressure 8

QUESTIONNAIREExercise frequency per weekWish to exercise more? YES/NOWould money help in encouraging to exercise? YES/NOIf so with long term effects? YES/NOGPAHappiness with social life (1-7)Happiness with academic affairs (1-7)Change needed in life (1-7)

QUESTIONNAIRE Exercise frequency per week

Wish to exercise more? YES/NO

Would money help in encouraging to exercise? YES/NO

If so with long term effects? YES/NO

GPA

Happiness with social life (1-7)

Happiness with academic affairs (1-7)

Change needed in life (1-7)9

RESULTS

Note that before refers to the eight weeks before the intervention period while after refers to the seven weeks after the intervention period

STUDY 1

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INCR

INCR

DECR

At individual level, in Study 1, 32% in the eight-times group increased their average number of gym visits by more than one per week, while only 2 participants (1 participant) in the one-time group (control group) did so. In Study 2, 40% of all participants in the eight-times group increased their average number of gym visits by more than one per week, while only 12% of the participants in the one-time group, and 13% of the participants in the control group did so. In both studies the test of the equality of proportions finds a very significant difference between the eight-times and control groups, as well as between the eight-times and one-time groups. There is no difference between the control and one- time groups in both studies.

STUDY 2

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INCR INCRINCR

REGULAR VS NON-REGULAR ATTENDEESWe can obtain a cross section of the population by categorising people before the intervention as regular attendees (at least one visit per week) or non-regular attendees. Hint: from a public policy perspective it may be more useful to target people who rarely visit the gym rather than regulars.

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In Study 1, 27 people in the eight-times group had not been attending the gym regularly. 44% of them (12 individuals) became regular attendees after being paid to go to the gym for a month. They account for 30% of the sample population.

In Study 2, 49 of 60 people in the eight-times group were ex ante non-regular attendees. 53% of them (26 individuals) became regular attendees. They represent 43% of the sample population.

Hypothesis 2 over Hypothesis 0 is supported in regard to both studies for ex ante non-regular attendees in the eight-times group. On the other hand, Hypothesis 0 appears to hold for the other treatments. Hypothesis 1 is generally rejected, although perhaps not for the people in Study 2 who were initially regular gym attendees.

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Hypothesis 0 = no effectHypothesis 1 = crowding-out effectHypothesis 2 = habit formation

CHANGES OVER TIME

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Eight-times group

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The change in the attendance rate for the eight-times group compared to the period before the intervention can be observed in the graph.

Is the change in the attendance rate consistent over-time?A regression shows that in study 2 the decay rate of the post-intervention attendance for the mentioned group is insignificant. A regression in study 1 instead displays that the post-intervention attendance rate (eight times group) actually increases by an insignificant rate.

Eight-times group

REGRESSION ANALYSIS

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The regressions confirm what was said earlier. Specification 1 of Study 1 indicates that only when eight visits are required a significant increase in post-intervention gym attendance is observed. Specification 2 shows that the effect largely vanishes for ex ante regular attendees who were required to visit the gym eight times.

Specification 1 of Study 2 also indicates that only when eight visits are required a significant increase in post-intervention gym attendance is seen. Specification 2 shows that the effect entirely disappears (going slightly in the other direction) for ex ante regular attendees who were required to attend eight times.

No significance for gender is found.

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BIOMETRIC AND QUESTIONNAIRE DATA

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Overall, with the exception of the blood-pressure measures, biometric indices of the eight-times group improved significantly relative to both the control group and (with the further exception of the pulse rate) the one-time group. It appears that there are real health benefits deriving from paying people to go to the gym eight times in a month.

No substantial differences in the responses to the questionnaire were found across treatment groups (as it would be expected with randomisation). Responses had little predictive power in terms of change in gym attendance overtime (and interaction effects were not significant). Consequently the mechanism by which one’s exercise frequency increases seems to be independent of one’s attitudes and views.

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CONCLUSIONS AND IMPLICATIONS

A positive effect from paying people to go to the gym eight times over a month period is observed, as the gym visit rate after the intervention significantly increased in both studies.

The incentive scheme employed was successful in creating the positive habit of exercising more. Indeed participants who did not attend the gym regularly before the study started to do so during the intervention and continued after.

Attendance rates do not decrease significantly in the post intervention period in both studies - habits increase the marginal utility of engaging in an activity in the future

Real-health benefits are correlated to exercising as seen in the biometric indices of the eight-times group when compared to the others.

Paying people who currently exercise regularly is at best a waste of money (could also have a crowding-out effect)

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OBSERVATION: Given the enormous sum of money spent on health care, even a little improvement can deliver large social benefits and money savings

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POSSIBLE EXPANSIONS

What are the effects of incentives on bad habits?

Why do the habits we are trying to eliminate seem different from the ones we are trying to acquire? (e.g. financial incentives often do not work in smoking cessation - Donatelle et al. 2004)

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