Incentivizing Behavioral Change: The Role of Time Preferences
By Shilpa Aggarwal, Rebecca Dizon-Ross, Ariel Zucker
2023
2023
Citation
Aggarwal, Shilpa., Dizon-Ross, Rebecca., Zucker, Ariel. (2023). Incentivizing Behavioral Change: The Role of Time Preferences .
Copyright
2023
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Abstract
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 e↵ectiveness,
suggesting limited impatience over payments. However, making the payment function
dynamically non-separable increases cost-e↵ectiveness. 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.
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 e↵ectiveness,
suggesting limited impatience over payments. However, making the payment function
dynamically non-separable increases cost-e↵ectiveness. 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.
Shilpa Aggarwal is an Associate Professor of Economics and Public Policy at the Indian School of Business (ISB). She is a development economist, whose research aims to explore market linkages in developing countries. For her PhD dissertation, she examined the effects of a road construction programme in India that connected remote rural areas to nearby markets. Her ongoing research is focused on agricultural supply chains in India and East Africa. She also works on issues pertaining to domestic trade, microfinance, and food policy.
Professor Aggarwal holds a PhD from the University of California, Santa Cruz, an MA from the Delhi School of Economics, and a BA from Shri Ram College of Commerce, University of Delhi.
Shilpa Aggarwal