Psychology and Economics to:

Better understand decision making Use insight to improve poor choices Design intervention and policies

‘Choice architecture’

Evidence of effectiveness Increasingly being adopted Untapped opportunities to prevent or

treat HIV/AIDS

Daniel Kahnemen Noble Prize in Economics in 2002 ‘Prospect theory’ work with Amos Tversky Psychologist won Nobel prize in Economics

Cass Sunstein, appointed by President Obama to use behavioral economics in govt. Head, White House Office of Information and

Regulatory Affairs Nudge, Richard Thaler and Cass Sunstein President Obama, Sunstein and Thaler all at University

of Chicago together

Precommitment device Financial incentives Lotteries Play on regret aversion Reminders, framing Defaults, opt in, opt out

Odysseus wanted to hear the enchanting music of sirens, but not be lured toward shipwreck

His solution: Precommitment device He was tied to the mast;

others had to plug their ears

Commit in advance to what Odysseus

wanted in a ‘cool’ period Knew his limitation in a ‘hot ‘ period Sophisticated:

› knew low self-control listening to sirens

Sophisticated vs naïve.

Dean Karlan, economist at Yale, › Wagered a bet he could lose weight –

gave money to a friend to officiate › It worked! He made a website StickK.com

($10 million bet online) › You bet that you can lose weight If lose weight, —get your money back.

If not lose — money goes to charity, or your least favorite cause!

Smaller serving size reduces calories Wainsink, ‘Mindless Eating”

Endless soup bowl

Hypothesize: smaller pack size would reduce smoking – 10 cigarettes per pack

Experiment online: Choice of number of cigarettes per pack – 10 vs. 20 vs. 30

› 37% choose the10 pack size

› Of those: 70% willing pay a financial premium!

0 70%

37%

10-Pack

Willing to pay more

Gamblers can sign up (in cool period) to

have the casino turn them away.

Smokers like higher tobacco taxes- precommit to cutback due to higher price

Agree to put future raises in savings automatically; › Even though would not put current raises in

savings

Naltrexone › Take daily to quit drinking, but if

want to drink that day… skip the pill › Newer once-a-month

injection (Vivitrol)

HOT / COLD periods Being of two minds – long term planners,

short run reactor ‘Time inconsistent’ (hyperbolic discounting);

strong present bias Slow vs. fast thinking, book by Kahnemen Cue based demand – rational until you see

the cake, drugs, cigarettes

Contingency Management with Nancy Petry

Small payments were effective. Why? Found to be effective, structure of

payment matters

Real costs are loss of job, money, family; risk of HIV/AIDS, STDs and overdose

Not rational; not explained by neoclassical economics

Want to lose weight When best to start diet?

Tomorrow… but tomorrow never comes Financial incentives

tip the balance toward today; Reinforce.

Use lottery to give prizes– if test drug-free

Individuals overweight small probability events

Maximize outcome per prize dollar in incentives

Not politically feasible, no budget to pay $1,000 to drug users

All enrolled automatic in a daily lottery If your name is drawn…

took your meds- get paid did not take meds- get

email saying should have taken meds- regret

(Lowenstein et al.)

Mexico and beyond pay parents for students’ good behavior

Bloomberg, NYC, but…. Hawaii drug users on parole – smaller

jail time with certainty, not uncertain large

Firms pay workers not to smoke

Low income, more likely to smoke— least likely for someone to pay incentives

Affordable Care Act, $10 million to CT and Yale Test incentives in large, randomized field study Incentives. Test: None, Low; High Test: pay on outcome vs. treatment Low income, Minority, Pregnant, Mental health

problems

Paid on objective criteria Frequent Immediate Salient Escalate to extend behavior Long time frame

Decision-making – difficult, complex Simplify – use short cuts in making decisions;

’heuristics’; rules Rules often serve well, but not always Systematic ‘mistakes’; biases Use these biases to develop interventions to

improve

BE Mechanism Bias to Address Precommitment device……..lack of self-control Financial incentives.…………present bias Lotteries .……………………….overweight low prob. Play on regret.…………………regret aversion Reminders. Framing .…………opportunity cost

neglect low salience

Defaults .………………………..status quo bias

Health vs. financial motivation to quit smoking (framing matters)

63% 37%

Smoking cessation brochures as picked up by financial vs. health message *

* In a financial setting

Financial Health

Improve adherence to: condom use, routine HIV testing, linkage to care, antiretrovirals, Pre-exposure prophylaxis (PrEP), etc.

Reduce risk of: unprotected sex, substance use, IV drug use, use of dirty syringes, etc.

Current Uses: Small financial incentives; Scott Braithwaite

Lottery to maximize impact per dollar, Nancy Petry

Different kinds of lotteries, , e.g. teams

Reminders, framing- Text messages in Africa, Pop-Elches

Take advantage of loss aversion – say would have won; meds

Not yet used? Precommitment devices? Make appoints for you. (no show risk)

Defaults, status quo bias, opt-out? weekly appointments

Lester RT et al. Effects of a mobile phone short message service on antiretroviral treatment adherence in Kenya (WelTel Kenya1): a randomised trial. Lancet 2010Petry, N.M. (2001). Contingent reinforcement for compliance with goal-related activities in HIV-positive substance abusers. Behavior Analyst Today, 2, 78-85.

Petry, N.M., Weinstock, J., Alessi, S.M., Lewis, M.W., & Dieckhaus, K. Group-based randomized trial of contingencies for health and abstinence in HIV patients. Journal of Consulting and Clinical Psychology.

Pop-Eleches C, Thirumurthy H, Habyarmina J, Graff Zivin J, Goldstein M, DeWalque D, MacKeen L, Haberer J, Sidle J, Ngare D, Bangsberg D, "Mobile phone technologies improve adherence to antiretroviral treatment in resource-limited settings: a randomized controlled trial of text message reminders," In press at AIDS 2011.

Rosen, M.I., Dieckhaus, K., McMahon, T.J., Petry, N.M., Valdes, B., Cramer, J., & Rounsaville, B.J. (2007). Improved adherence with contingency management. AIDS Patient Care and STDs, 21, 30-40

What happens when stop paying? Internal versus external motivation? Unfair to those not receiving? Administrative costs?

Develop habits that last When stop paying outcomes still better Learn internal motivation Becomes a habit

Unfair; not doing so can be unfair to re costs on others

Paternalistic; Asymmetric; Libertarian

Popular Books on Behavioral Economics Richard Thaler, and Cass Sunstein, Nudge: Improving Decisions on Health, Wealth, and Happiness. New Haven,

CT: Yale University Press, 2008.

Dan Ariely, Irrational Exuberance.

Nancy Petry Petry, N.M., Peirce, J.M., Sitizer, M.L., Blaine, J., Roll, J.M., et al. (2005). Prize-based incentives increase retention in

outpatient psychosocial treatment programs: Results of the National Drug Abuse Treatment Clinical Trials Network Study. Archives of General Psychiatry, 62, 1148-1156.

Petry, N.M. (2001). Contingent reinforcement for compliance with goal-related activities in HIV-positive substance abusers. Behavior Analyst Today, 2, 78-85.

Petry, N.M., Weinstock, J., Alessi, S.M., Lewis, M.W., & Dieckhaus, K. Group-based randomized trial of contingencies for health and abstinence in HIV patients. Journal of Consulting and Clinical Psychology.

Rosen, M.I., Dieckhaus, K., McMahon, T.J., Petry, N.M., Valdes, B., Cramer, J., & Rounsaville, B.J. (2007). Improved adherence with contingency management. AIDS Patient Care and STDs, 21, 30

Jody Sindelar Sindelar JL, Elbel B, Petry NM. What do we get for our money? Cost-effectiveness of adding contingency

management. Addiction 2007 Feb;102(2):309-16.

Olmstead TA, Sindelar JL, Petry N. Cost-effectiveness of Prize Based Incentives for Stimulant Abusers in Outpatient Psychosocial Treatment Programs. Drug and Alcohol Dependence 2007 Mar 16;87(2-3):175-82. Epub 2006 Sep 12.

Sindelar JL, Olmstead T, Peirce J. Cost-effectiveness of Prize Based Contingency Management in Methadone Maintenance Treatment Programs. Addiction. 2007 Sep;102(9):1463-71. PMCID:

Sindelar JL. Paying for performance: the power of incentives over habits. Health Econ. 2008 Apr; 17(4):449-51.

Richard Thaler Thaler, Richard H., The Winner's Curse: Paradoxes and Anomalies of Economic Life. New York: Free c Press, 1991.

Sunstein, Cass and Richard H. Thaler, "Libertarian Paternalism is Not an Oxymoron.“ University of Chicago Law Review 70 (4), (2003): 1159-1202.

Sunstein, Cass and Richard H. Thaler, "Libertarian Paternalism." The American Economics Review 93 (2), (2003): 175-179.

Richard H. Thaler and Shlomo Bernartzi, "Save More Tomorrow: Using Behavioral Economics in Increase Employee Savings." Journal of Political Economy 112(1), (2004): S164-S187.

Richard Thaler, and Cass Sunstein, Nudge: Improving Decisions on Health, Wealth, and Happiness. New Haven, CT: Yale University Press, 2008.

Kevin Volpp LK John, G Loewenstein, AB Troxel, L Norton, JE Fassbender, Kevin Volpp (2011), Financial Incentives for Extended

Weight Loss: A Randomized, Controlled Trial, Journal of General Internal Medicine, Note: Epub ahead of print

Kevin Volpp, AB Troxel, Mark V. Pauly, Henry Glick, Andrea Puig, David Asch, R Galvin, J Zhu, F Wan, J DeGuzman, E Corbett, J Weiner, J Audrain-McGovern (2009), A Randomized Controlled Trial of Financial Incentives for Smoking Cessation, The New England Journal of Medicine, 360:699-709

Kevin Volpp, Mark V. Pauly, G Loewenstein , D Bangsberg (2009), P4P4P: An Agenda for Research on Pay for Performance for Patients, Health Affairs, 28(1): 206-14

Kevin Volpp, L John, AB Troxel, L Norton, J Fassbender, G Lowenstein (2008), Financial Incentive-based Approaches for Weight Loss: A Randomized Trial, JAMA, 300(22): 2631-2637

G Loewenstein, TA Brennan, Kevin Volpp (2007), Asymmetric Paternalism to Improve Health Behaviors, JAMA, 298(20): 2415-2417

Good Solutions for Bad Behavior: Introduction to Behavioral Economics1. What is Behavioral Economics?2. Why is Behavioral Economics Worth Learning?3. If you do not believe me…4. Behavioral Economics Interventions5. Pre-commitment device – Odysseus 6. Precommitment Device – key features7. Pre-commitment device – �on the web8. ‘Serving size’ as a precommitment device9. Smaller Cigarette Pack – analogy to food serving size10. Precommitment Devices – examples cont.11. Precommitment Devices – examples cont.12. Different ways of understanding need for pre-commitment device13. Respond to cues?14. How I Became Interested in Behavioral EconomicsSlide Number 1616. Results Puzzled Me – Behavioral Economics Explains�17. Financial Incentives. �Why work? Present bias�18. Lottery / Prize-based IncentivesSlide Number 2020. Lotteries with a twist – play on regret aversion.� Medication Adherence21. Financial Incentives – evidence/examples22. Medicaid financial payments to quit smoking 23. Financial incentives – Are most effective if payments are:24. Behavioral Economics Basics: ‘bounded rationality’ not superhumanly rational25. List of Decision-making Biases26. Pay yourself. �Opportunity Cost Neglect – make salient (reminders)27. Opportunity to apply �to HIV/AIDS �28. HIV/AIDS: �Current Uses / Possible Applications29. Designated Smoking Room 30. References�(Application to HIV/AIDS)31. Financial Incentives – Detractors?32. Financial Incentives – Responses to detractors 33. Additional References34. Additional References – cont.