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Journal of Economic Perspectives: Vol. 25 No. 4 (Fall 2011)

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When and Why Incentives (Don't) Work to Modify Behavior

Article Citation

Gneezy, Uri, Stephan Meier, and Pedro Rey-Biel. 2011. "When and Why Incentives (Don't) Work to Modify Behavior." Journal of Economic Perspectives, 25(4): 191-210.

DOI: 10.1257/jep.25.4.191

Abstract

First we discuss how extrinsic incentives may come into conflict with other motivations. For example, monetary incentives from principals may change how tasks are perceived by agents, with negative effects on behavior. In other cases, incentives might have the desired effects in the short term, but they still weaken intrinsic motivations. To put it in concrete terms, an incentive for a child to learn to read might achieve that goal in the short term, but then be counterproductive as an incentive for students to enjoy reading and seek it out over their lifetimes. Next we examine the research literature on three important examples in which monetary incentives have been used in a nonemployment context to foster the desired behavior: education; increasing contributions to public goods; and helping people change their lifestyles, particularly with regard to smoking and exercise. The conclusion sums up some lessons on when extrinsic incentives are more or less likely to alter such behaviors in the desired directions.

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Authors

Gneezy, Uri (U CA, San Diego)
Meier, Stephan (Columbia U)
Rey-Biel, Pedro (U Autonoma de Barcelona)

JEL Classifications

D82: Asymmetric and Private Information
H41: Public Goods
I20: Education and Research Institutions: General
D12: Consumer Economics: Empirical Analysis
I18: Health: Government Policy; Regulation; Public Health

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