Incentivizing Behavioral Change: The Role of Time Preferences

How should the design of incentives vary with the time preferences of agents? We formulate predictions for two incentive contract variations that should increase efficacy for impatient agents relative to patient ones: increasing the frequency of incentive payments, and making the contract ``dynamically non-separable'' by only rewarding compliance in a given period if the agent complies in a minimum number of other periods. We test the efficacy of these variations, and their interactions with time preferences, using a randomized evaluation of an incentives program for exercise among 3,200 diabetics in India. On average, providing incentives increases daily walking by 1,300 steps or roughly 13 minutes of brisk walking, and decreases the health risk factors for diabetes. Increasing the frequency of payment does not increase effectiveness, suggesting limited impatience over payments. However, making the payment function dynamically non-separable increases cost-effectiveness. Consistent with our theoretical predictions, agent impatience over walking appears to play a role in non-separability's efficacy: both heterogeneity analysis based on measured impatience and a calibrated model suggest that the non-separable contract works better for the impatient.