31 Pages Posted: 1 Jun 2006 Last revised: 8 Mar 2009
Date Written: December 18, 2008
Can incentives be effective when trying to encourage the development of good habits? We investigate the effect of paying people a non-trivial amount of money to attend an exercise facility over a period of time. We find that doing so leads to an attendance level that is twice as high as the level when people have not been paid, even well after the end of the intervention. This result is driven primarily by the impact on non-users (people who did not previously attend the gym), as regular users are essentially unaffected. We observe no difference across gender. Even though personal incentives to exercise are already in place, it appears that the financial incentive serves as a catalyst to get some people past the threshold of actually getting started with an exercise regimen. We argue that there is scope for financial intervention in habit formation, particularly in the area of health.
Keywords: Intrinsic incentives, extrinsic incentives, habits, exercise, crowding-out, motivation, health
JEL Classification: A13, B49, C99, I10
Suggested Citation: Suggested Citation