Do incentive schemes have things back to front?

Posted by adi on Oct 15, 2008 in Work

Cashback websites are well established now and with Microsoft deciding last month to start rewarding people for using their products it seems that incentivizing people to use a service is an effective means of honing behaviour.  But could it be done better?

The whole notion rests on that of reciprocity.  Game theory went to great lengths to investigate just how people react in such circumstances and by and large found that a tit-for-tat approach is taken.  In a gift exchange game, where two persons in turn determine how large gifts to give to one another, a large gift by the first mover is reimbursed by the second mover.

In incentive schemes however the onus is very much on the user to complete an action, and for them then to be rewarded for so doing by the website.

Whilst this clearly works to an extent, could it work that much better?

Another theory that appears to support the giving by the website in return for action by the user is Endowment theory.  The endowment effect suggests that the value assigned to an item rises once a person has ownership of it.  So in other words, we value things more once they’re ours than when they are not.

So in this context the user would be rewarded outright and would then have to earn the right to keep their reward.

Incentivized websites are big businesses at the moment, with the cashback sector drifting wholesale towards a 100% cashback model.  Is there room for something a little bit different in the market?

Tags: cashback, endowment, Endowment effect, game theory, incentives, reciprocity, Tit for tat

Do environmental messages do more harm than good?

Posted by adi on Oct 15, 2008 in Work

I’m sure we’ve all seen messages deriding the population for flying too much or generally wasting electricity. Most of these messages seem to be framed to highlight the sheer amount of waste we produce, something like “10 million Brits fly each year producing 1 billion tonnes of co2 per year”, or something similar.

It got me thinking, does this kind of message actually encourage people to fly rather than the intended result of discouraging people from taking to the air? I read a psychology study yesterday from America that seems to suggest just that. The study focused on Petrified Forest National Park, and the theft of petrified wood from the forest by visitors.  The park had a number of signs dotted around saying:

Many past visitors have removed petrified wood from the park, changing the natural state of the Petrified Forest

The theory goes that because the signs highlighted how many people stole wood it reinforced that behaviour.  So a study was setup whereby an extra sign was added, along with areas with no warning sign at all.  The new sign said:

Please don’t remove the petrified wood from the park, in order to preserve the natural state of the Petrified Forest

With an image of a lone theft and a red warning sign around his hand.

The results were quite staggering.  The old sign saw theft at just under 8%, no sign at all saw theft at just under 3%, and the new sign saw theft fall to under 2%.

So, the point of this post.  Are all the environmental messages that highlight the sheer scale of the damage we’re doing to the environment having the adverse effect of highlighting just how many of us do it, and therefore supporting the activities involved rather than discouraging them?

Tags: environment, framing, message, Petrified Forest, Petrified Forest National Park, Petrified wood, pyschology