http://www.growthology.org/growthology/human_capital/
Economists and psychologists are making amazing discoveries, and one of the most interesting is the cornerstone of “prospect theory” based on research by Nobel prize recipients Kahneman and Tversky. This theory suggests that people tend to have a greater aversion to losses than they have attraction to making gains. And now we see more policies and programs rooted in good theory.
To wit, if someone paid you to lose weight with your own money, would that get you to pump iron? Beter phrased, what if they withheld payments if you gained weight, would that affect you? The latest research says yes.
"[Researchers] said weight-loss programs that reward people with money -- and remind them of the cash they stand to lose if they fail -- provided a powerful incentive to lose weight compared with more conventional approaches.
. . .
[Volpp the main researcher] said many weight-loss programs fail because people are being asked to make sacrifices now for rewards in the future.
"We wanted to create a reward system which gave them rewards in the present," said Volpp, whose study appears in the Journal of the American Medical Association.
Volpp and colleagues studied two kinds of incentive programs for weight loss. One was a lottery-based design in which participants played a lottery and were allowed to collect their winnings if they met their weight-loss target.
The lotteries were running daily, and people were told what their winnings would have been if they had met their weight-loss target.
"There is a very strong sense of loss aversion," the theory that people are highly motivated to avoid losses, Volpp said in a telephone interview.
"The idea was to create a mechanism where loss aversion would help drive people's motivation," he said. \\\
That’s like putting a person with depression into a room with Triumph the Insult Comic Dog and a gun