Effects of financial incentives on the breakdown of mutual trust

Disagreements between psychologists and economists about the need for and size of financial incentives continue to be hotly discussed. We examine the effects of financial incentives in a class of interactive decision-making situations, called centipede games, in which mutual trust is essential for cooperation. Invoking backward induction, the Nash equilibrium solution for these games is counterintuitive. Our previous research showed that when the number of players in the centipede game is increased from two to three, the game is iterated in time, the players are rematched, and the stakes are unusually high, behavior approaches equilibrium play. Results from the present study show that reducing the size of the stakes elicits dramatically different patterns of behavior. We argue that when mutual trust is involved, the magnitude of financial incentives can induce a considerable difference.     

Why liberals should accept financial incentives for organ procurement

Free market libertarians have long supported incentives to increase organ procurement, but those oriented to justice traditionally have opposed them. This paper presents the reasons why those worried about justice should reconsider financial incentives and tolerate them as a lesser moral evil. After considering concerns about discrimination and coercion and setting them aside, it is suggested that the real moral concern should be manipulation of the neediest. The one offering the incentive (the government) has the resources to eliminate the basic needs that pressure the poor into a willingness to sell. It is unethically manipulative to withhold those resources and then offer payment for organs. Nevertheless, the poor have been left without basic necessities for 20 years since the passage of the prohibition on incentives. As long as the government continues to withhold a decent minimum of welfare, liberals should, with shame, cease opposing financial incentives for organ procurement.     

Behavior analysts in the war on poverty: A review of the use of financial incentives to promote education and employment

Poverty is a pervasive risk factor underlying poor health. Many interventions that have sought to reduce health disparities associated with poverty have focused on improving health‐related behaviors of low‐income adults. Poverty itself could be targeted to improve health, but this approach would require programs that can consistently move poor individuals out of poverty. Governments and other organizations in the United States have tested a diverse range of antipoverty programs, generally on a large scale and in conjunction with welfare reform initiatives. This paper reviews antipoverty programs that used financial incentives to promote education and employment among welfare recipients and other low‐income adults. The incentive‐based, antipoverty programs had small or no effects on the target behaviors; they were implemented on large scales from the outset, without systematic development and evaluation of their components; and they did not apply principles of operant conditioning that have been shown to determine the effectiveness of incentive or reinforcement interventions. By applying basic principles of operant conditioning, behavior analysts could help address poverty and improve health through development of effective antipoverty programs. This paper describes a potential framework for a behavior‐analytic antipoverty program, with the goal of illustrating that behavior analysts could be uniquely suited to make substantial contributions to the war on poverty.     

The impact of financial and nonfinancial incentives on business-unit outcomes over time

Unlike previous behavior management research, this study used a quasi-experimental, control group design to examine the impact of financial and nonfinancial incentives on business-unit (21 stores in a fast-food franchise corporation) outcomes (profit, customer service, and employee turnover) over time. The results showed that both types of incentives had a significant impact on all measured outcomes. The financial incentive initially had a greater effect on all 3 outcomes, but over time, the financial and nonfinancial incentives had an equally significant impact except in terms of employee turnover.     

Improving payment of traffic fines with financial incentives: Discounts vs. penalties

The effective enforcement of traffic laws is critical for improved road safety outcomes. Decisions to follow traffic rules and pay fines are influenced by formal institutions (e.g. laws, court summons, and fines) as well as informal institutions (e.g. norms and aspects of culture). Formal and informal institutions create incentives that should be designed to steer individuals’ behaviour towards desired outcomes. Unfortunately, there is no reason to believe that the institutions to deal with traffic violations in South Africa currently create effective incentives. This paper discusses the findings of a controlled laboratory experiment, conducted with a sample of university students, that tested the efficacy of different financial incentives that may influence the payment of traffic fines. An early payment discount was compared to a late payment penalty (used in other countries, for example, some states in the USA), and to the absence of any incentives. Furthermore, we examined whether the willingness to settle fines is sensitive to the likelihood of detection by the authorities. We found that introducing financial incentives significantly increases voluntary payment of fines, irrespective of whether immediate payment is encouraged with a discount or late payment is discouraged with a surcharge. In addition, subjects are more sensitive to the likelihood of detection when financial incentives are present.     

The big carrot: High‐stakes incentives revisited

Using an international dataset of about 35 000 subjects, this paper provides an empirical example of high‐stakes incentives in relation to religious practice. First, we show that incentives (based on absolute belief) play a salient role in religious performance. Second, we find that when both positive (heaven) and negative (hell) incentives are available the former are more effective than the latter. Specifically, it is shown that beliefs in heaven are much more relevant than beliefs in hell when estimating the production of religious commodities (church‐attendance and praying equations). Copyright © 2009 John Wiley & Sons, Ltd.     

Effects of monetary incentives on task switching

In two experiments, effects of incentives on task switching were investigated. Incentives were provided as a monetary bonus. In both experiments, the availability of a bonus varied on a trial-to-trial basis. The main difference between the experiments relates to the association of incentives to individual tasks. In Experiment 1, the association of incentives to individual tasks was fixed. Under these conditions, the effect of incentives was largely due to reward expectancy. Switch costs were reduced to statistical insignificance. This was true even with the task that was not associated with a bonus. In Experiment 2, there was a variable association of incentives to individual tasks. Under these conditions, the reward expectancy effect was bound to conditions with a well-established bonus-task association. In conditions in which the bonus-task association was not established in advance, enhanced performance of the bonus task was accompanied by performance decrements with the task that was not associated with a bonus. Reward expectancy affected mainly the general level of performance. The outcome of this study may also inform recently suggested neurobiological accounts about the temporal dynamics of reward processing.     

Encouraging electricity savings in a university residential hall through a combination of feedback, visual prompts, and incentives

This experiment investigated the combined use of visual prompts, daily feedback, and rewards to reduce electricity consumption in a university residential hall. After a 17-day baseline period, the experimental intervention was introduced in the intervention hall, and no change was made in the control hall. Energy usage decreased in the intervention hall, but energy usage did not change appreciably in the control hall. In the intervention hall, mean daytime and nighttime savings were 16.2% and 10.7%, respectively, compared to savings of 3.8% (day) and 6.5% (night) in the control hall.