Rice, 2013:

The Behavioral Economics of Health and Health Care

Abstract
- Traditional economic theory; assumes decisions rational, mental capacity for large
information amounts & choice, tastes endemic to them & not open to manipulation
- Behavioral economics: acknowledges people don't act rationally in economic sense
Introduction
- Traditional economics: assumes people behave rationally, seek information on quality &
costs all feasible options, use information properly to maximum utility; choice of best
interest & know which makes them best off
- Fall short; self control, value present v future enjoyments, excessive positive
value to status quo over new opposing information, overstating/understating risk
for certain contingencies
- Behavioral economics: people don't always act rationally, myopic decisions on
inadequate understanding of alternatives, not learning from mistakes
- Article 4 parts;
1. Limitations of traditional economic theory
- Traditional economic theories
- People know what makes them best off & how to achieve with available
resources through choosing from alternatives in marketplace
- infer quality & costs from marketplace information
- Not influenced by exaggerated claims, advertisements
- Predetermined tastes & preferences; already know what want, cannot be
convinced
- Homo economicus: rational economic man
- Hyperrational decision making to improve welfare
- Preferences formed before entering marketplace
- Maximizing, not satisficing
 - Decisions on self interest; not envy/altruism; cant explain joining army, donating,
charity, recycling
- Maximization:
- Bounded rationality: cognitive limitations on how much information can process
& remember when needed
- Making multiple decisions→shortcuts/heuristics used over utility
maximizing behavior
- satisficing>maximizing; otherwise overwhelming amount information
due to limited cognitive abilities & time to process it
- →more attention decision making process: core behavioral economics; decision
making individually, communally, political units
- Not in traditional economic theory; assumes choosing best option available
based on preferences & price/quality data; interest in outcome, not decision
making process
- Heuristic search: devising/identifying search procedures allowing systems with limited
capacity to make complex decisions & solve difficult problems
- Prospect theory: choices evaluated based on possible losses/gains linked with
outcomes, not on utility of outcome
- alternative to individual economic risk taking behavior
- Risk aversion on prospect of gains, risk seeking in face of losses
- Risk aversion: prefer certainty to win 500€> 50/50 winning 1000€
- Risk seeking: prefer 50/50 losing 1000€>certainty losing 500€
- Too much choice: choice viewed motivating, energizing
- →maximizing (not satisficing) in choice filled environment→lower
satisfaction, regret over foregone options, less happiness, greater
depressive tendency
- Libertarian paternalism: arguing government & organizations should aid
consumers in decision making; not making decisions in best interest→nudged
for right direction by more knowledgeable ones
- Contrary traditional economics
2. Insights from behavioral economics
- Behavioral economics & psychologists; habits, biases, other tendencies in underlying
decision making; systematic patterns cognitive biases in health behaviors
Endowment effect/status quo bias
- Endowment effect: possession of something→feel ownership over
it→overvalue, hold onto it, avoid alternatives even when advisable
- Two groups complete task→reward given e.g. chocolate/coffee mug
- Traditional economic theory; chocolate lover given a mug→would trade
to chocolate because underlying preference dictates reward choice
- Experiments: tendency to overvalue initially given gift, feel
ownership→reluctance to trade
- Status quo bias: preference for current state of affairs
- Despite benefits of retirement savings, americans save little for retirement; not
enough to allow to live at same standard of living as before
 - Opt out system; default to participate in retirement savings, to opt out
formally decline
- As opposed to opt in, default to do nothing
- More successful in saving for retirement
- Addresses loss aversion; not leaving with less disposable income
Loss aversion
- Loss aversion: heightened tendency to focus on avoiding losses, even if it means
engaging in risky behavior
- 2 times weight given to losses v gains
- How choice framed; in terms of losses/gains→influences decision made
- E.g.
- Group 1: outbreak→Program A: 200 people saved, B: 1/3 chance 600
people live, 2/3 chance no one will→program A chosen
- Group 2: outbreak→Program A: 400 people die, B: 1/3 chance no one
will die, 2/3 chance 600 people die→program B chosen
- →choice framed in terms of living v dying
- Risky alternative preventing 600 people from dying>risk aversive choice ensuring
400 would die
Overly discounting the future
- How decisions made between present & future
- →Time discounting: favoring present over the future
- Self control basic problem; present, salient temptation v remote, incremental future
- Behavioral economists: remove temptation; foresight overtaken by overt present of
tempting stimuli
- E.g. not filling appetizer bowl in dinner party because ruins later enjoyment of
dinner
- Rational calculus trumped by temptation
- E.g. governments mandatory public pension system; choice not left to individual
- Cognitive dissonance: contradicting opinions→unpleasant, causes
dissonance→cognitive tools to justify contradicting behaviors e.g.
exaggerating derived benefit, undermining future costs
- People don't want to imagine being too old to earn money & care for
self→do not save enough; wrong tradeoff based on own preferences
between current consumption & retirement savings
Decision fatigue
- Rational decision making consistency; under same circumstances, people make same
choices
- After multiple decisions→brain gets lazy→prone to bad decisions
- Parole 2/3 times granter after breakfast, snack, lunch, close to zero right before meal
- Food intake/rest from work as reason
- Sweets near checkout isles; decisions on what to buy→ego depletion
- Poor people more subject to decision fatigue; small decisions big monetary implications
Too much choice
 - E.g. option to sample jams & discount at checkout→30% with 6 flavor options
used coupon, 3% with 24 flavors (with 24 likelier to stop to taste)
- Individual investors & retirement savings; excessive choice negative consequences fro
investment; especially induces demotivation
- More choice→low yield, less risky investments, overly conservative strategy
Summary
- People overly oriented to present>future, concern over losing something they already
have>gaining something they haven't yet experienced
- People are cognitively limited→heuristics>all possible choices, framing
influences, decision fatigue
- Preferences mutable; evolve over time & influenced by environment, can be manipulated
(advertising)
3. Applying behavioral economics to health & health care
- Lack & difficulty understanding information in face of multiple choices, wrong decision
can have multiple negative consequences, decisions not seeming in their long run best
interest
- Organ donation, health insurance take up, simplification of choice, reduction tobacco
use, obesity
- Consumer decision making on individual level
Organ donation
- Traditional economic theory: determinant psychic benefits (helping a stranger) v psychic
costs (wishes of family, religion..)
- Willingness to donate organs depends on framing;
- Higher donation rates with opt out system for donating; indicates unwillingness to
participate
- Low rates: opt in system: give permission to donate
Enrollment in government sponsored health insurance programs
- Eligible but not signed up; lack of understanding eligibility & enrollment procedures &
administrative roadblocks
- Improving take up rates in public health programs; low rake up rates because
- Understanding costs & benefits of alternatives, amount of choice bias present
over future, misunderstanding degree of faced risk, framing issues in their mind
(certainty paying small premium v certainty using program)
- Automatic enrollment, community based reach, coverage of needed benefits
Simplification of prescription drug insurance plan choice
- Number of available choices; few choosing most cost effective plan
- Even providing information→people not making good choices; present less
information, focus on salient information, limit number of choices
Reduction in tobacco use
- Traditional economic methods; higher prices through taxes, information about costs of
smoking, regulations about second hand smoking moderately effective
- Behavioral economics;
- Signing contracts to quit smoking, rewards to those who do
 - Encouraging use of electronic cigarettes; engaging in related behavior easier
than eliminating behavior fully; not as bad health effects as smoking
Obesity
- Obesity not a rational choice; weight gain not result of maximizing utility over given fixed
preferences
- Influence of companies; changing tastes for calorie dense foods; direct
advertising, product placement
- Weight loss study
- Control
- Deposit contract incentive: deposit money→refunded if meet goal
weight
- Lottery incentive: meet weight loss goal→automatically entered into
lottery
- Experimental conditions more successful weight loss, long term not known?
4. Issues for future consideration
- Preferences not fixed, behavior not rational, cannot handle all information
- →nudges by governments etc to promote welfare into direction serving their
interest
- 2 major challenges
- Lack of unifying theory
- Distinguishing behavioral v traditional economics; price incentives common
interventions
- Price & information for interventions + regulations banning activities/substances
- Reduced alcohol use in young people through legal age limit & raising liquor
taxes
- Behavioral interventions not as effective; complements to achieving policy goals,
not substitutes

Volpp et al., 2015:

Behavioral Economics and Health
Key points
- Behavioral>standard economics predictive & descriptive model of human behavior
- Aware+consider decision errors
- Health improvement programs improve health>save money
Intro
- NCDs noncommunicable diseases; hypertension, physical inactivity, alcohol overuse ⅔
deaths, behavioral choice driven
- Benefits of advances in health case e.g. cancer screening; poor adherence
- Large gap theoretically & actually achieved
- Behavior change experts focus on changing individual behaviors & environments
- Policy makers target individual behavior (incentives) or environmental strategies e.g.
mandatory food labeling
- Approaches built in limitations; designed based on health decisions being rationally
based; assess present value of costs & benefits of alternative paths & pursue best path
 - Incentives used; assume only incentive magnitude matters & that design,
feedback frequency, salience, framing don't

Behavioral economics & difference on classical economics

- Behavioral economics builds on traditional economics with core of expected utility
maximization;
- Expected utility theory: individuals rational utility maximizers, consider alternatives,
calculate probabilities of utility/disutility for outcomes, through backward induction decide
decision with highest value; weighing different outcomes where weights based on
probabilities of different outcomes
- Limitations;

- Assumes people fully rational, self interested, stable preferences

- E.g. obesity not about preferences
- Preferences change over time, depending on reference (start) point,
influenced by other factors e.g. social context
- Conventional economics: regulatory interventions e.g. targeted taxes, subsidies only in
externality situations/other market failures; costs individuals actions impose on others
e.g. secondhand smoking that
- Bounded rationality
- Prospect theory
1. How people feel on outcomes depends on reference point
2. Sensitivity to gains/losses can decrease depending on starting point
3. Loss aversion; disutility of loss>utility of gain
- Nonlinear probability weighting: overweighting small probabilities
- Reference point:
- 2 people have $4 million; yesterday one had $1million & other $7million
 - 2 people get $500; other one has $0 and other $1million; smaller utility
- Expected utility theory compares 2 states of wealth; not accounting how people think
about utility varies between gains & losses
- Loss aversion ratio
- Risk aversion with gains, risk seeking with losses; outbreak example
- Framing on outbreak example
- Limitation expected utility theory; hyperbolic discounting
- Behavioral: various ways people discount outcomes nearer in time more than
those further off in time; discounting inconsistent
- Traditional: people discount future
- Policy intervention justified in internalities: costs that people impose on themselves e.g.
long term health effects of smoking
- Internalities from making decision errors
Traditional economics
- Expected utility maximization
- Perfect rationality
- Starting point & assessment independent
- =/=framing
- Preferences stable
- Future constant discounting
- Interventions: negative externalities (actions adversely affect others)
- Regulations & policy: protect from others
Behavioral economics
- Prospect theory
- Decision errors
- Assessment depends on starting point
- Framing affects assessment
- Discount near future more, discounting inconsistent
- Interventions: internalities (harm future self)
- Regulations & policies: protect from self
Framework for thinking about behavioral economics
- Asymmetric paternalism: public policy;
- Paternalistic: internalities; help individuals achieve goals, protect them from
themselves (traditional externalities; prevent individuals from harming others)
- Asymmetric: help individuals prone to irrational decisions without limiting people
making informed, deliberate decisions
- Compared to paternalism only; protecting people without limiting freedom
of choice
- E.g. cafeteria healthy food first, without limiting ability to purchase unhealthy
foods
- Traditional economics poor decisions: reflection of hidden rational choice, behavioral
economics; poor choices due decision errors
- How incentives delivered>their objective magnitude
 Present biased
preferences
- 2 behavioral
tendencies
1. Over
weig
ht

immediate costs & benefits relative to those happening in future

2. Impartial approach to delayed costs & benefits
- Begin diet tomorrow>today; overweight immediate costs→deters from
deprivation of dieting immediately
- Balanced perspective delayed deprivation→impose costs in the future
- Promotes unhealthy behaviors, can be used for health behaviors
- Rewards for good behavior, punishments for bad behavior
immediate→increased motivational impact of costs & benefits
- Consequences coincide close to timing of deterred/encouraged behaviors
- Substance addiction:
- Adverse consequences e.g. jobless, strained relationships; insufficient
motivations
- Incentives from proof of sobriety; in smoking cessation (delayed
ineffective)
- Immediate rewards to situation where benefits of avoiding behaviors distant & uncertain
- Not making decisions based on long term benefits→short term incentives;
beneficial actions easier to choose
- E.g. candy & soda less accessible→costs to obtain walking off campus
- Committing to future changes; choices between health benefiting/harming before acting
on them: cancellation fee on doctor visit
Nonlinear probability weighting
- Disproportionate weight on outcomes with small probability, insensitive to variations in
probability at low end of probability scale
- E.g. 0.001 v 0.00001 chance winning; overweighting responsible for lottery ticket
attraction
- Lottery based reward systems exploit overweighting small probabilities; motivation by
experience of past rewards & prospect of future rewards
- Small frequent payoffs, infrequent large payoffs
Overoptimism & loss aversion
- Overoptimism: overoptimistic about life outcomes, especially predictions exerting self
control
- False hope syndrome
 - E.g. flat rate for gym membership because overestimate
attendance→per visit cheaper
- Loss aversion: more weight on losses; exessive risk aversion to sunk cost fallacy
- Putting money at risk to adhere to health goals
- Weight loss study: overoptimism by deposits on weight lost & loss aversion once
deposits made
Peanuts effects
- More willing to gamble when playing for small amount
- Small gains/losses not motivating; health behavior change emphasis on efforts for
repeatedly achieving small changes
- Rewards immediate & tangible, costs seem small & distant
- Tendency to underweight small events
- →asymmetrical thinking; frequent feedback on rewards because present bias,
delivering financial rewards in bundle;
- Penatus effect; alert people to rewards daily, deliver them monthly for large aggregate
payment
Narrow bracketing
- narrow/choice bracketing; grouping individual choices together into sets
- Broad bracketing: considering all consequences together (standard economic)
- Narrow bracketing: considering each decision in isolation
- Tendency narrow bracketing & focus on local consequences of most immediately
available choices, ignoring aggregate costs & benefits over long time horizon
- Bracketing effects interact with other biases, can induce other biases; e.g. peanuts effect
more likely to occur when benefits framed narrowly
Regret aversion
- Anticipating possible future regret & seeking to make decisions to reduce risk
- Avoiding anticipated regret to combat present bias
- Preventive behaviors; vaccination use increased in those who experienced illness after
not being vaccinated
- Notify winners & losers; had adhered→would've won
Default status quo bias
- Tendency to take path of least resistance continue what have been doing/what comes
automatically even with superior alternative
- Defaults; e.g. eating a whole supersized meal
- Opt in v out policies organ donation
- Default→increased rates
- Choice architect: person making decisions on how choices presented to the end user
Rational world bias
- Assumption peoples choices are considered & rational
- Especially in policy
- Assuming information provision only required thing
- Health insurance plan complexity; lacking understanding of basic concepts,
Applications of behavioral economics
Application 1: weight loss interventions
Early studies on impact of incentives on weight loss
- Money deposits/made contracts→return on investment contingent on weight
loss progress/goal
- Selection bias: high penalties deter participants with insufficient funds/lack of motivation
to enter
- Mean weight loss same in groups, not depending on contract size but proportion of
participants reaching goal higher in larger amounts
- Increasing payment larger weight loss during weight loss phase, maintenance program
without payments not preventing weight loss

Recent studies on financial incentives on weight loss

- Increased weight loss with different incentives→achieving maintenance issue
Daily lottery & precommitment highly effective
- Most regain weight; framed as maintenance?
- Weight loss program v weight loss+maintenance→no difference in
mean weight loss
Application 2: efforts to improve medication adherence
- Changing underlying defaults
- 30 day prescription→90 day prescription
- Opt out vs opt in; automatic refills
- Lottery based incentives increased medication adherence
- Need to reach patients & reinforce behavior each day major challenge
- Behavioral economics: want to affect behavior that occurs frequently, you have to
engage the person at nearly same frequency;
- Technological advancements
- Still daily lottery>technological device in medication adherence

Heyman, 2009
Addiction and Choice
- Hurricanes & addiction reflect general principles, not specific principles
- Everyday choices & addiction explained by motivational principles
- Ordinary conditions→adaptive optimal choices
- Option is drug→same principles can lead to addiction
- Addiction depends on general principles of choice, unique behavioral effects of addictive
drug, individual & environmental factors affecting decision making
- Voluntary behavior; most human behavior actions not elicited but contingent on
circumstances & history
- Reflexes & instincts role in human behavior especially newborns, dynamic environments
& experience shape actions (more than genes)
- ~all environments support more than one activity→most behavior = choice
behavior
- Restaurant problem by heyman:
 1. Prior preference chinese→preference change based on where you eat
2. Eating one food→reduced preference for it because habituation
Not eating one food→increased preference because dishabituation
3. Habituation & dishabituation stronger for chinese>italian food

- Both strategies governing principle choosing what is best

- Differ in how define options
- Majority would go to restaurant prefer currently; usually chinese, sometimes italian,
switch back to chinese (local)
- Restaurant evaluated in terms of value at the moment of the choice
- Meals change in value as function of how frequently chosen→how
tonights meal chosen influenced future meals value not included in
calculation
- Current value of the cuisine mattered
- Minority say that since meals change in value based on which one
chosen→let favorite meal get really good (increased value) & then choose it
(global)
- Letting value of favorite meal increase
- →choice includes more than current value of competing options
- Build up takes time = each option is a series of meals
- For chinese meal to get better, need to choose some less desirable italian meals
for a good chinese meal in the future = conflict between day vs multiple day
strategy
- Hypothetical restaurant problem→2 patterns of decision making
- Majority: best at the moment, options single items
- Minority: options competing meal plans; options aggregates composed of single
items
Preferences are dynamic
- Choices & value dependent on each other, interact dynamically
- Eating chinese→reduced future value, increased future value italian
food
- New activities & stimuli exciting/appealing at first→boring/aversive after while
- Some commodities value ever increasing trajectory; e.g. passions; ever increasing
enjoyment as become more skilled
- Choices made based on values of outcomes & choices alter values of outcomes
Multiple ways of framing possible options for series of choices
- Local choice: choosing between available items one at a time; choosing meal each
night
- Simple, ignores dynamics linking choice & changes in value
- Global choice: organizing items into sequences & choose between different
sequences; sequences composed of italian & chinese
- Options reflect dynamic relationship between choice & changes in value
Always choosing better option
- Local choice = melioration: best choice = item with currently higher value
- Global choice: best choice collection/sequence of items with higher value
Principles summarizing responses to restaurant problem:
- Dynamic preferences
- Series of choices possible option multiple framings
- Better option by choice approach
 - Preferences changed as function of choice
- Option framed locally; current value of each meal
- Option framed globally; values of every possible combination
- Different ways of framing; inner dialogue with decision making process
- Both approaches yield predictable outcome (assumption of same price, differ in provided
enjoyment)

- Stable overall choice proportion: consistent decision making pattern where choices
based on changing values & preferences
- Local approach: outcome a stable overall choice proportion where two lines cross =
local equilibrium: current value of the two options is the same
- →after local equilibrium value of the other option becomes higher
- Stable choice proportion: regularly switching between 2 options until balance
reached
- Stable overall choice proportion despite values changing as function of choice
- Global approach: stable overall choice proportion; no better way to allocate choices;
when value of all possible choices reaches its peak & no better way to allocate choices
- Global equilibrium: value of each possible meal plan reaches maximum value
- Meal distribution further from best meal plan→decreased
enjoyment→realign back to peak eating experience combination
- Restaurants & (dis)habituation the same→framing options→different choice
patterns
- Different ratios & overall preferences & gained enjoyment
- How options framed made the difference
Lessons of dining out
1. Predict patterns of observed behavior in research
 - Local equilibrium: choice proportions approximate/match reward proportions
- Matching law (=local equilibrium): mathinc occurs over various conditions
- Species, rewards, research settings observed that choices made
predicted by local equilibrium
- Global equilibrium special efforts required to ensure;
- Standard economics market baskets aggregates of choices
- Businesses should do this
2. Voluntary behavior-/→best outcome
- Suboptimal equilibrium in graphs
- Choices assumed to be guided by local equilibrium in standard economics
- →ignoring other ways of framing the options (economics & psychology)
- →analyses of choice too narrow
3. Voluntary behavior & overconsumption
- Different equilibriums for local & global
- Option framed from local perspective & decision made→from global
perspective overconsumption
- Local equilibrium ~typical findings in laboratory & natural settings;
overconsumption related to voluntary actions
4. 2 possible outcomes & each best from their frame of reference
- Contingencies guiding voluntary behavior ambiguous
- →local perspective choice A & global choice B
- Agent aware of different ways of decision making→ambivalence, regret
- Since one option best, one option worst
- Choice can stabilize at suboptimal levels, suboptimal, voluntary actions can include
overconsumption, contingencies guiding choice are ambiguous
- Contradict assumption that actions guided by rationality
Graph addiction
- DSM: continued use despite substance related problems; withdrawal & intoxication
interferes with daily life
- Drug use increases→value of competing non drug activities decreases
- Tolerance increases→consumption dependent decreases in value for drug
- Local choice: decision to get high day to day basis
- Global: decision overall number of days out of 30
- Initial values of competing choice items & how value changes as function of
choice; daily basis drug users prefer days with>without drugs, same
tolerance, dishabituation→frame options differently; choice to get high today
(local)/days which wants to get high (global) →equations combined differently
-
 - Local graph: X = number of days drug used in the last thirty days
- Y = Current value drug & nondrug days
- Values change depending how often drug used
- Decrease in value of drug = tolerance
- Decrease in nondrug activities = drug related problems
- Withdrawal, intoxication; social situations, work
- Global graph: X = days used last 30 days
- Y = value of each possible 30 day sequence drug days & nondrug days
- Highest value one with 0 drug days
- Globally framed choices would never use drugs
- Real graph more complex; moving from low to moderate drug use can include increase
in value of drug use & increase in value of nondrug activities
- Person represented by graphs self destructive & excessive, decrease in welfare due
drugs, drug choice = best choice, always chose drugs
- Global graph addiction; self destructive properties, regretting past behavior, anticipating
future relapse = global perspective
- H: principles predicting everyday choices predict also addiction
- Addiction: mismatch between how choices are made & properties of drugs
- Local frame: future & indirect consequences of current choices don't count
- →wouldnt matter if costs & benefits equally apparent; for drugs costs
delayed, uncertain, indirect
- →bias in relationship between perceived costs & benefits; perceived
costs discounted→actual value of drug distorted & promotes further
use
- Distortion not because pathology/cognitive deficit
- Choices based on current values of options→reasonable in most
circumstances
- Addiction result of basic principles applying voluntary action & behavioral effects of
addictive drugs; not disease/abnormal decision making
Why is it hard to quit
- Switch to global perspective→stop drug use
- Difficult to maintain global perspective because rewards in global perspective
accrue slowly; beginning of abstinence nondrug days value<drug days (local
perspective)
- Drug use persists; value of drug declined & costs growing so addiction hard
to understand→worst drug days value>abstinence period
- Day level abstinence starts off worse than drug use
- Cannot forget how good drug use was→quitting requires changing
circumstances
- Quitting possible with changing conditions reducing value of drug compared to nondrug
alternative
- Economic condition
- Experiences promoting global bookkeeping perspective; at odds with social roles
behavioral pattern (over days) not particular choice (one day), with lifestyle
 - Shifted framing not enough to quit→first weeks of abstinence no day greater
than worst drug days→commitment required to global approach
- Blocking access to drugs, reduce their value (methadone) →increased
value nondrug alternatives
Predicting distinctive features of addiction
Vocabulary of relapse
- Last time/special occasion
- Local perspective: drug best choice
- Global: abstinence best choice
- Last choice in series of choices→no difference in local v global
perspective as global requires continuing choice sequence
- When there is only one choice→only local perspective applies
- Reference point shifted to local; drug best choice
Spontaneous recovery
- Changes in circumstances causing perspective to shift from local→global; if
frame influences choices a lot, can seem like spontaneous recovery
- E.g. new job, relationship
- Quitting at once; rarely with other psychopathologies
- Addiction involves voluntary drug use; voluntary behavior utilizes local & global
perspectives
Voluntary addiction =/= choosing to be an addict

Bickel et al., 2014:

The Behavioral Economics of Substance Use Disorders: reinforcement pathologies and
their repair
Intro
- Pathological & normal processes quantitative difference, not qualitative;
- Normal behavioral development & functioning from seeking & obtaining
appropriate reinforcers contingent on adaptive & prosocial behavior
- Addicting substances used→reinforcement processes awry; especially
when available & alternatives lacking
- Reinforcement pathology: joint effects of
a. High valuation of reinforcer; tangible commodities & experiences
b. Excessive preference for immediate acquisition/consumption of commodity
despite long term negative outcomes
- Reinforcement pathology from interactions between endogenous (physiological
response to drug, devaluation of delayed reward) & exogenous factors (durg &
alternative reinforcement price/availability)
- Behavioral economics→understanding reinforcement pathology
- Operant learning approaches; behavioral economics applied to substance use
- Quantity drug taking behavior linked to substance price
- Immediate & delayed outcomes in decision making
- Article: reinforcement pathology review on
- Principles behavioral economics central for reinforcer pathology
 - Processes causing reinforcer pathology
- Approaches & procedures to repair it
Principles of behavioral economics
- Reinforcement pathologies result of choice patterns with additive influence
on later options & choices; commodity use increases→decision making
processes underlying pathological reinforcer consumption
- Principles behavioral economics for reinforcement pathology: demand & discounting
Demand
- Valuing substance more than other commodities
- Subjective hedonic value, total level of resources allocated to obtain substances, extent
consumption sensitive/insensitive to change in price
- Price: monetary cost, effort, time needed to obtain commodity/commodities
- Unit price; cost benefit ratio; cost÷unit of commodity
- Unit price modeled with response requirement = cost ÷ reinforcer magnitude
- Changing price/unit price on behavior; elasticity of demand
- Change in consumption relative to change in price
- Demand: amount commodity purchased at given price
- Inelastic demand: demand insensitive to price change
- Elastic demand: demand sensitive to price change

-
Unit price
- Effect of price on consumption
- Drug self administration data: components contributing to unit price (response
requirement & reinforcer magnitude) equivalent effects on self administration
- Doubling response requirements & halving reinforcer magnitude similar decrease
in drug consumption
 - FDA: can regulate cigarette nicotine content, cannot eliminate nor control
prices→halving amount of nicotine in cigarettes = doubling prices of
cigarettes on decreased demand
Reinforcer interaction
- Individuals can select substance over opportunities with greater long term
advantages→how commodities interact with other commodities in the
person’s life
- Commodities can interact in 3 ways
- Substitute; price increases & consumption decreases for one
good→consumption increases for another good with unchanged price
- Complements: price increases & consumption decreases for one
good→consumption decreases for another good
- Independent: price increases & consumption decreases for one
good→no change in consumption for another one
Opportunity cost
- Situations where options mutually exclusive; choosing one→foregoing
another
- Opportunity cost: best alternative not taken
- Alternative reinforcement decreases substance consumption by increasing cost of
substance use
- Alternative reinforcer competes with substance use→increases opportunity
cost for substance use (what gained from abstinence) →substance use
decreases
- Few alternatives to substance use→less likely to change use
- Increased level substance free reinforcements (social support, goal directed/prosocial
behaviors) in reducing substance use>abstinence only
Discounting & related processes
- Discounting processes: how much value reinforcer loses as function of manipulated
variable
- 3 primary variables: delay, probability, social distance
- delay/temporal discounting: extent reinforcer value decreases as function of its
temporal distance
- Probability discounting: degree reinforcer uncertainty decreases value of
reward
- Social discounting: reinforcer valuation delivered to another person decreases
as function of social distance between two individuals
- Other parameters: type/magnitude or reward, rewards gains/losses, combinations
delays/probabilities, rewards received future/past, influence of delay in social situations,
cross commodity interactions (money now v drugs later)
Delay discounting
- Matching law: allocating responses in choice situation
proportional to relative rates of reinforcement among options
 - Assess through preferences between smaller immediate & larger delayed rewards;
money most common; maintains value, quantity manipulable; e.g. $75 now v $100 in a
month
- Specifies devaluation of rewards across delays
- Hyperbolic model
- Accounts for preference reversal from larger later to smaller sooner to smaller
sooner
- Exponential discounting
- Both smaller sooner & larger later rewards in distant future→larger
later preferred
- Larger later preferred even when smaller soon immediately available
- time-/→change in preference as reward draws closer
- Hyperbolic discounting; preference reversal
- Smaller sooner & larger later rewards far in future
- Larger later>smaller sooner reward; preference larger reward
- →crossed discounting curves→smaller soon immediately
available→reversed preference smaller soon>larger later
- Hyperbolic discounting model & addiction; consistent stated preference for larger
delayed rewards linked with sobriety
- Smaller soon reward immediately available→surpasses larger soon
reward of abstinence→preference reversal
- Immediate availability of substances, drug binges
- Delayed gratification: waiting for consequence reduces reinforcement
- Receiving preferred delayed reward requires continual resistance from opting for
smaller soon & less preferred reward
- Marshmallow study: ability to resist; college entrance exams, propensity to
addiction
Excessive probability discounting
- Probability discounting: devaluation of rewards due to uncertainty
- 100% receiving $50, 50% chance receiving 100$
- Gambling: lower probability discounting; less discontinuing due to uncertainty; value
uncertain rewards more highly
- Substance abuse: higher probability discounting
- →gamblers overvalue uncertain rewards, substance abuser undervalue
uncertain rewards
- Delayed rewards competing with substance abuse uncertain (health, education)
compared to immediate consistent rewards of substances (euphoria, sedation)
- Maladaptive decision making with higher delay & probability discounting; devaluing
delayed/improbable outcomes prefer drug use>alternative behaviors
Other forms of discounting
- Social discounting: personal value of reward declines as function of social distance to
rewards recipient
- Receiving certain amt of money vs having person at certain social distance receive the
money
 - $5 to self v $75 given to the fifth closest person in your life
- Value rewards given to close v distant individual
- Varied sensitivity that certain social distance reduces value to self
- Pregnant smoking women relapse in smoking greater decrease in personal reward value
due to social distance to reward recipient compared nonrelapsed
- Higher social, delay, probability discounting in drug users
Interaction between demand & discounting experimental evidence
- Discounting future→spending more resources to obtain a good (drugs) even
at higher prices (inelastic) & consumer large quantities with low prices
- Inconclusive & limited studies
- Rats:
- higher delay discounting rates (smaller sooner>larger later) →some
studies more inelastic demand (change in costs>demand), some
unrelated
- Humans: higher delay discounting sometimes related to higher demand
Processes engendering reinforcer pathology
- Overvaluation & overconsumption
- Demand & discounting
- Endogenous (person level) factors developing & maintaining addictive behavior;
biological circuit alterations, maladaptive cognition, experiential cravings
- Behavioral economic perspective unique: integrates interplay individual & environmental
factors
Person level factors: demand & delay discounting
- High levels of drug demand & delay discounting (immediate preference)
- Demand & delay discounting: valuing drugs as reinforcers & preference smaller soon
rewards
Drug demand as etiological process
- Demand & substance dependence
- Higher substance demand & lower intervention response
- E.g. alcohol demand moderates between impulsive personality & alcohol use
- Tobacco demand & nicotine dependence
- Cross sectional data
- High demand maintaining factor reducing benefits of interventions
- Escalating demand over increased experience
Delay discounting as etiological process
- Steep delay discounting & substance use disorders
- Moderated by clinical severity
- Negative prognostic factor in treatment
- Linked with clinical problems: HIV sharing needles, condom use drug users
- Etiology & maintenance
- Neurobiological circuits in delay discounting decisions independent of response
disinhibition
- Predictive initiation & progression of drug self administration in rodents
 - Discounting causal role development of addictive behavior, chronic drug
exposure→increased delay discounting
- Stable characteristic
Factors affecting demand & discounting dynamically
- Environmental drug dues (associative conditioning) →increased demand
- Acute withdrawal→increased demand & discounting
- 2 processes substance dependence
- Reactivity to drug related environmental cues
- Withdrawal due physiological dependence
- Associative conditioning & acute withdrawal→ direct effects on demand &
discounting→choice behavior
- Experiences summate over time→high levels demand & discounting stably
observed→over time dysregulated decision making
Environmental factors; availability of alternative reinforcers (opportunity cost)
- Behavioral economics focus behavior aggregates, not instances;
- High endogenous factors (high demand & impulsive discounting)
- Low exogenous factors (alternative reinforcers)
- Internal motivational state & available alternative reinforcers in the
environmental context→decision to use/not use drugs
- Drinking socially part of positive & negative reinforcing behaviors→escalation
of use→increased negative consequences & decreased availability of
alternative reinforcers→increased reinforcing value of alcohol
- Primrose path model of addiction; vicious addiction cycle
- Empirical research: alternative reinforcers
- Contexts with least available substance free reinforcers (food, exercise, housing,
social access) highest rates
- Chronic substance abusers decreased neural activation & less reinforcement to
nondrug rewards
- Presence alternative reinforcers negatively related to smoking development
- mediator; higher baseline depression→reduced alternative
reinforcement→increased smoking
- Subjective valence of nondrug pictures negative link future drug use
- Clinical studies
- Alternative reinforcers higher treatment success
- Successful treatment linked with more sources of alternative reinforcement
- Behavioral economic treatments: enhancing alternative reinforcers
Neurobiological substrates
- Chronic exposure to drugs→neuroadaptations→functional & structural
changes to brain
- Key neural regions
1. Prefrontal cortex: executive functioning
2. Subcortical circuits: motivation; nucleus accumbens, ventral striatum
3. Antireward circuits: stress systems, acute & aversive states from intoxication to
withdrawal
 - Areas vulnerability for continued addictive behavior; altered decision making,
motivational drives, reduced sensitivity nondrug rewards, semi chronic aversive state
- Neuroadaptive changes & behavioral economics compatible
- Demand increased
- Exaggerated drive/motivation for incentive value
- Executive functioning reduced cognitive capacity to consider costs
- Prolonged aversive state: negative reinforcer to alleviate state
- Reduced sensitivity to non drug alternatives
- impulsive/high discounting
- Prefrontal & subcortical regions behavioral manifestations of neuroadaptive
changes
- Antireward system: withdrawal effects; chronic antireward system
- Alternative reinforcers
- Decreased executive functioning→looking, planning, engaging in new
activities unlikely
- Behavioral genetics: genetics factors
- No addiction gene
- Many genetic loci with small effect
- Genes role in pharmacokinetics (metabolic processing) & pharmacodynamics
(CNS actions)
- Behavioral genetics & economics on endophenotypes/phenotypes
- Intermediate phenotype: characteristics informative of genetic relationships
- Endophenotype: characteristics meeting multiple criteria showing independence
& links to genetic variables & clinical phenotypes
- Both closely related to genetic variation
- Greater delay discounting endophenotype
- Variation in discounting heritable, reliable, linked with familial addictive behavior
Repair of reinforcer pathologies
Constraint of unhealthy choice
Direct environmental constraints: reducing availability & increasing the price of unhealthy choice
commodities
- Molar account of behavior: relates behavioral aggregates (substance use & substance
free activity patterns) to reinforcement/price contingency aggregates
- Behavioral economics
- Molecular account of behavior: predicting outcome of decision to use/not use on specific
time/moment
- Commodity consumption negative relation to price/response requirement
- Price = costs; monetary, time, effort, legal/health costs, negative impact of
substance use to other rewards
- →increases in costs decreased substance use, decreased costs
increased substance use
- Behavioral level: price & opportunity cost; drinks bought as function of price & next day
responsibility (cost & alternative reinforcer)
- Reduced consumption with increased price & available alternative reinforcer
 - Prevention & intervention successful
- Increasing direct constraints on substance use
- Increasing availability of alternative reinforcers

-
- Public health level prevention consistent with behavioral economics
- Enforcing age limits
- maintain/increase taxes
- Reduce quantity of places selling
- Prescribing practices to misused prescription medications
- Availability of prosocial activities increasing opportunity cost for substance abuse
Contingency management as constraint
- Change users environment
- Use & abstinence readily detected
- Abstinence reinforced
- Substance use→loss of reinforcement
- Reinforcement density from nondrug sources is increased to compete with
reinforcement from substances
- CM increases costs (loss of reinforcement) from detected substance use
- Continuous abstinence from escalating reinforcement schedules
- Day 1 $5 to day 7 $50
- Opportunity cost of substance use increased over time
- Substance abusers high delay discounting (undervalue delayed outcomes)
→frequent verification of abstinence & cos of substance use soon after use
- CM effectively applied to reduce substance use, increased life quality, cost effective
(alternative inpatient, health care costs, incarceration)
- Modifications
- Low value vouchers delivered probabilistically (random intervals like gambling)
- Access to paid employment to reinforce abstinence
Other behavioral approaches to reduce consumption through increased constraints on drug
choice
- Increased constraints on substance use, reduced availability, increased real/perceived
costs
- Community reinforcement approach CRA: developing alternative reinforcements
incompatible with substance use
 - Behavioral couples therapy BCT: daily sobriety contacts, disulfiram, significant others
withhold reinforcement upon use
- Superior to control condition
- Brief motivational interventions BMI: increased motivation to change through
awareness of costs & consequences
- Decisional balance exercise; pros & cons of use
- Highlighting tangible costs; money spent, years lost
- →Consider total costs v overall benefits substance use, motivate self
regulation & informed decision making
- Consistent with behavioral economics; outcomes of extended choice patterns
aggregated into meaningful units (per week, over year..)
- Removing drugs & paraphernalia
- →removing triggers that increase craving & demand for substances
- →increasing effort cost for obtaining new drugs
- Substance use monitoring through low cost available drug test kits, parental monitoring
adolescents
- Medications
- direct/indirect withdrawal alleviation →reduce demand for drug
- Substitutes for drug
- For AUD induce sickness→reduces demand through positive/negative
reinforcement, response cost from sickness

Reduced constraint of healthy choice

Restructuring environments to enhance access to healthy choices
- High substance abuse rates in context without non substance reinforcers
- Substance abuse linked with decreased dopamine response to naturally occurring drug
free rewards
- Substance use decreases if access to alternative reinforcers increases; increasing
healthy alternatives
- Chronic substance use step by step help, non severe brief interventions
Community reinforcement, contingency management, behavioral couples therapy: enhanced
access to substance free reinforcement contingent on abstinence
- CRA & CM: Drug free reinforcement availability
- CRA>care as usual
- Earning liveable wage through working/acquiring job skills, contingent on urine samples;
not long term
- Transition from chronic substance abuse to stable employment
- CM effective when vouchers reinforce engagement in substance free activities
consistent with treatment goals; likeliest group to provide drug free urine samples;
importance drug free alternatives
- Brief behavioral activation approaches→decreased depression through
engaging in social & goal directed activities, supplemental/stand alone
- BCT: rewarding drug free activities, increased reinforcement to improve couples daily
interactions
Direct behavioral economics enhancement of brief motivational intervention for alcohol misuse
in young adults
- BMI: motivational interviewing to increase motivation for change, small moderate effect
sizes
- Few alternative to drinking, increased demand/impulsivity non responsive
- →behavioral economics principles substance free activity sessions SFAS
- SFAS: target substance free activities & temporal discounting
- For heavy drinking college students to increase engagement in
academics/extracurriculars linked with delayed rewards, lower drinking
- Identify future goals
- Personalized feedback & information to
a. Increase motivation for goal pursuit; value delayed rewards highlighted
b. Specific, personalized plan to future goals
- SFAS personalized feedback time allocation patterns different categories on
goals & values
- Increased salience of delayed outcomes & degree behavior leading to
reward/punishment part of mola pattern to decrease impulsive response patterns
- BMI+SFAS greater decrease heavy drinking with low levels substance free
reinforcement & depression
- Increased mechanisms; future time orientation, self regulation, participation
Improved impulse control & executive function
- Decreased executive function & impulse control
- Targeting underlying decision making patterns
- Changing discount rate on temporary alterations, when impermanent stimulus
present
- Fading procedures, behavioral contracts, pharmacological interventions more lasting
Fading procedures
- Increased choice of larger, delayed rewards→decreased discount rate
- Choice between 2 reinforcers with different sizes both available after same
delay→ larger reinforcer established→delay smaller reinforcer gradually
decreased with adjustment schedule
- →maintains choice of larger, more delayed reinforcer
- →over time learn to choose delayed reinforcers where before smaller soon
option chosen
- No published data on fading procedures in increasing self control
Contracts including deposit contracts
- Agreement with undesirable consequences
- Controlling behaviors involving self control
- High discount rate→reduced self controlled choices
- Hyperbolic discounting curve→high discount rate make self controlled choices
when two options significantly delayed
- Contract precommitment strategy; moves decision point for substance use
form present & available→prior to ingestion when agreement made
 - →avoiding preference reversal where immediate reward substance
use>delayed rewards abstinence
- Changing consequences when drugs available for use; engaging in substance use &
~immediate negative financial consequence
Pharmacological approaches to impulse control
- Dexamphetamine & methylphenidate decreases discount rate, high abuse liability
- Non stimulant drug for ADHD & animal models self control increases, low abuse
Executive function training
- Self control & discounting behavior linked with executive function capacity
- Discount rate interventions affecting executive functioning; behavioral executive
functioning training utility in behaviors
- Working memory training active condition v control condition: working memory training
increased working memory capacity & decreased discount rate/reported use
Conclusions
- Behavioral economics new theoretical tool, molecular analysis
- Reinforcer pathologies: high demand & delay discounting
- Conceptual model of high valuation of substance & excessive discounting
delayed rewards
- Future direction: interaction between demand & discounting
- In preventive model
- H: low demand & discounting least likely & greatest treatment response, high
demand & discounting likeliest & lowest treatment response
- Functional phenotype in treatment
- Heavy drinking & low alternative reinforcers for drugs→treatment
addressing deficit>
- Behavioral economics variables applied to brief motivational interviewing, implicit/explicit
incentives to increase substance use opportunity costs

Halpern et al., 2015:

Randomized Trial of Four Financial-Incentive Programs for Smoking Cessation
Abstract
- Method: 2 individual & group based→reward/deposit+control
- Results:incentive
- programs>care as usual
- rewards>deposits
- individual=group
Introduction
- Financial incentives to promote health behaviors
- Typically traditional economics: size of incentive determines effectiveness
- Behavioral economics: similar size with different design→different
effects
- Deposit contracts; putting money at risk & collect reward if succeed
- Loss aversion>gain seeking
- Deposit making deters from participating
 - Groups motivated by social comparison
- Collaborative incentives: payments to successful group
members→increased group success by interpersonal accountability,
teamwork
- Competitive designs: don't change behavior→deposit divided to group
members; loss aversion by regret of other benefiting from failure
- Aim: smoking cessation programs based on rewards/deposits delivered at
individual/group level, 3 measures
- Acceptance: accept offered incentive program
- Overall effectiveness: people offered each program who stop smoking
- Efficacy: stop smoking if accept incentive program
Methods
- Population: interested in quitting smoking, randomization→accept/decline
intervention, target quit date
- Randomization: random assignment to group, subgroups (stratified) based on health
care benefits+household income
- Intervention:
- All offered usual care; smoking cessation resource information, cessation guides,
(behavioral modification programs/nicotine replacement therapy; healthcare
dependent)
- Individual deposit group: $150 returned if quit
- Collaborative reward group: increased payments with increased group success,
chatroom for communication
- Competitive deposit: distributing quitters deposit+matching reward, anonymous
descriptions for competitiveness
- Sustain abstinence individual/group→+$200 bonus each check up
- Outcomes:
- Primary outcome: sustained abstinence
- Secondary outcome: initial quit date, sustained abstinence different time points
Results
- Intervention acceptance:
- reward>deposit based interventions
- Individual = group based incentives
- Effectiveness & cost of interventions
- 4 programs>case as usual sustained abstinence
- 6mths only reward based superior to usual care
- 6mths reward based>deposit incentives, group = individual
- Pharmacological cessation aids no higher abstinence
- Lower costs deposit group
- Intervention efficacy
- Deposit based>reward incentives sustained abstinence
- Higher treatment effect deposit>reward in participants accepting either type of
program
 - Accepting deposit & reward>reward only higher underlying propensity to stop
smoking
Discussion
- Deposit programs less effective because few people accept them
- Deposit programs more efficacious>reward based in people who would’ve accepted
either
- Loss aversion
- Group based = individual
- Individual rewards>usual care cessation rates
- Limitations
- Low acceptance deposit program→limited ability to compare efficacies
- Only some access to pharmacologic & behavioral cessation aids; did
not increase cessation rates→incentives superior
- 50% sustained abstinence from 6 to 12mths; incentive durability
- Strengths
- Measured contribution of acceptance & efficacy to overall effectiveness
- Behavioral economic theory based design features;
- repeated payments to reinforce target behavior
- Bonus payments to decrease discounting future events importance
- Feedback about gains/losses contingent on self reported
smoking→maximize loss aversion
- Rewards>deposits for smoking cessation effectiveness
- Deposits>rewards for smoking cessation efficacy & cost effectiveness