Behind contingent cash transfer: Using violations of the Fungibility Principle to increase incentives effectiveness in behavior change

University Of California-San Diego, La Jolla CA

Investigators

Abstract

In recent years, the use of incentives in programs intended to increase school attendance and improve grades, reduce smoking, and encourage exercise has become more popular. Understanding how incentives interact with other motivations is a key to assuring the success of such programs. Often, a small change to the incentive structure can have a dramatic impact?positive or negative?on outcomes. In this research, the investigator examines the extent to programs involving incentives can be designed so as to increase the value of the incentive as perceived by recipients without increasing the actual cost of providing the incentive, consequently increasing the return on incentives. To the extent these program re-designs prove effective, they can be used in a variety of socially important behavior-change efforts, from improving health outcomes, to reducing pollution, to increasing productivity and savings. The research builds on ?mental account theory? which posits that to decide how to spend their money, people first mentally allocate their funds between different accounts and then make spending decisions within each account. This results in violation of the economic principle of fungibility by which money in one mental account should be a perfect substitute for money in another account. In the context of programs that use incentives to help people achieve goals, mental accounting implies that program effectiveness can be increased by targeting the incentives to a specific, highly desirable, mental account. Two sets of experiments are proposed to explore this ?targeting? hypothesis. Some studies look at whether participation in such programs can be increased by simply relabeling or repackaging the incentive to address an expense perceived by people as particularly aversive. A second set of studies examines whether participation can be increased by structuring the incentive provision in such a way as to trigger non-monetary considerations in the valuation process.