Is ‘Crowding Out’ Evidence Driven by Disproportional Reach by Motivation Type?

While the notion of incentives has long been central to the discipline of economics, only recently have economists begun to study the role of financial incentives in behavioral interventions, such as weight control programs. However, the spillover psychological effects complicate the incentives’ effectiveness. The effect has the potential to counter the policy goals since it can make the targeted behavior less desirable.

Gneezy et al (2001) decompose the effect of monetary incentives into two components: a direct price effect, which makes the incentivized behavior more attractive; and an indirect psychological effect, which may make the behavior more or less attractive. This indirect psychological effect can be further broken down into a signaling effect that gives information about the task, agent or principal, and a crowding out effect that reduces other motives for undertaking the task. This decomposition highlights the importance of considering psychological effects when designing financial incentives. The first step is to understand what types of people are reached by those programs and to see whether or not the empirical crowding out evidence was mainly driven by this type of disproportional reach or not.

To accomplish this, we explore whether, and how, people with different types of motivations respond differently to a hypothetical weight control program with and without financial incentives (i.e., participation willingness and change of their mind). The first-hand data comes from a survey administered to over 2000 overweight/obese patients recruited from an electronic patient database containing Treatment Self-Regulation Questionnaire (TSRQ) that is validated to measure different forms of motivations (i.e., amotivation, intrinsic, and extrinsic motivations). Binary and multiple response models were used to estimate the effect of motivation types on the willingness-to-participate in the program, and then estimate motivation influence on the probability of change-of-mind when incentives were presented.

Results show that, without incentives, intrinsically and extrinsically motivated people are more likely to participate in the weight control program. Furthermore, intrinsically motivated people responded more positively than extrinsically motivated ones, and extrinsically motivated people are more likely to say ‘maybe’ which implies that they are less likely to say definite 'yes' to programs. Furthermore, we found that the incentive magnitude produces different willingness to participate across different motivation profile and different nudge effects when incentive is introduced. Larger incentive magnitudes are likely to reach people with high extrinsic motivations and convert them to say “no” to program without incentive to program with incentive. On the other hand, small incentive pairs tend to attract intrinsically motivated people while extrinsically motivated people are less likely to be converted. The TSRQ is robust between different scale measures.

Knowing participant motivation profile is important for informing program design, especially for recruitment and retention strategies that minimize the negative spillover of incentives.