Many struggle to change health-related behaviors. One reason is that people seeking to lose weight, increase exercise, or stop smoking act in a time-inconsistent manner. For example, someone joins a gym but does not go. These inconsistencies not only affect the individual’s health but increase health insurance costs because of poor health. As a result, firms, insurers, policymakers, and health professionals are exploring using financial incentives to change health behaviors (Royer, Stehr, and Sydnor 2015). Using financial incentives to change behaviors has two potential problems. First, participants may just be paid for doing what they planned to do anyway (i.e., people who go to the gym three times per week would have done so without the incentive). Second, participants may revert to their old behaviors when the incentive ends.

Royer, Stehr, and Sydnor (2015) tried two approaches with employees at a large company. Randomly selected employees were paid $10 per visit to their company’s on-site exercise facility (for up to three visits per week). After a month, half the group was offered the chance to fund a commitment contract. This contract allowed participants to make a pledge that they would continue to use the gym for the next two months. Employees who kept their pledges got the money back. For employees who did not keep their pledges, the firm donated the money to charity. Visits to the gym fell after the incentives ended, but they fell by less for employees who made pledges.

An alternative strategy is to give a “nudge.” Martin and colleagues (2015) gave randomly chosen patients wearable activity trackers that used Bluetooth to connect with their smartphones. The activity trackers connected to a smart texting system. Physicians wrote the text-message content, which mentioned the patient’s physician by name. Combining smart texts with activity tracking increased physical activity the most. Compared with patients that did not receive texts, nearly twice as many patients that received texts met the goal of 10,000 steps per day.

Discussion Questions

• Why do people act in a time-inconsistent manner?

• Have you ever acted in a time-inconsistent manner? Why?

• Can you find examples of firms incentivizing workers?

• Can you find examples of insurers incentivizing beneficiaries?

• Can you find examples of providers incentivizing patients?

• How could you avoid paying people to do what they were going to do anyway?

• How could you reduce backsliding?

• Why did making a pledge increase gym use?

• Why would getting a “nudge” increase exercise?

• Can you find other examples of nudges?