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Incentivizing Behavioral Change: The Role of Time Preferences

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  • Shilpa Aggarwal
  • Rebecca Dizon-Ross
  • Ariel D. Zucker

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 incentive 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.

Suggested Citation

  • Shilpa Aggarwal & Rebecca Dizon-Ross & Ariel D. Zucker, 2020. "Incentivizing Behavioral Change: The Role of Time Preferences," NBER Working Papers 27079, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:27079
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    2. Werthschulte, Madeline, 2020. ""Pay-later" vs. "pay-as-you-go": Experimental evidence on present-biased overconsumption and the importance of timing," ZEW Discussion Papers 20-089, ZEW - Leibniz Centre for European Economic Research.
    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. 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.
    6. 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.
    7. Lagarde, Mylène & Riumallo Herl, Carlos, 2025. "Better together? Group incentives and the demand for prevention," LSE Research Online Documents on Economics 125349, London School of Economics and Political Science, LSE Library.
    8. 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.
    9. Andrej Woerner, 2021. "Overcoming Time Inconsistency with a Matched Bet: Theory and Evidence from Exercising," CESifo Working Paper Series 9503, CESifo.
    10. Mylène Lagarde & Carlos Riumallo Herl, 2023. "Stronger together: Group incentives and the demand for prevention," Tinbergen Institute Discussion Papers 23-0010/V, Tinbergen Institute.
    11. 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.
    12. 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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    More about this item

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development

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