By:Â Steve Martin
As any good economist will tell you, people respond to incentives. But as aÂ behavioralÂ psychologist will also point out, peoplesâ€™ responses to incentives will be influenced as much by the context in which an incentive is presented, as whatâ€™s actually on offer. For example, people are generally more persuaded by the thought of avoiding a loss of something than gaining the exact same thing. In the arena of loss versus gain, what is the same economically becomes very different psychologically.
Timing can provide an important context too. Studies have shown our tendency to live for today at the expense of tomorrow. Offered a choice between $20 today or $22 tomorrow, most will take the money now. Change the context though – $20 in a weekâ€™s time or $22 in eight days – and more people will wait the extra day for the bigger reward and, in doing so, demonstrate how frustratingly inconsistent human decisions andÂ behaviorÂ can sometimes be.
So when it comes to using incentives to influence behaviors, context (such as a loss versus gain frame or timing of the reward) matter. A lot! And according to new research, so does how you categorize incentives. It seems that separating incentives into different categories can motivate more people to acquire them â€“ even if those categories are meaningless!