Reward Now, Punish Later

In a Kellogg Insight article, Florian Herold, an assistant professor of managerial economics and decision sciences at the Kellogg School of Management explains how the timing of reward and punishment can affect the adoption of behavioral change. Based on game theory, he studied three incentive structures: reward only, punish only, and reward and punish. The reward only was useful in changing some behavior but becomes expensive because the person only changes behavior when he is confident he will be rewarded. When only punishment is being used, two states emerge. Sometimes people cooperate to avoid punishment. Sometimes no one cooperates and no one enforces punishment. When both are used, rewards are more useful in changing behavior initially. Once there is significant adoption, switching to punishment is more cost-effective in maintaining the new behavior state.

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