Tuesday, January 6, 2015
Learning Economics Through Pictures - Weight Loss Bets and Loss Aversion
This is picture from the site dietbetter.com. At this site, you can actually make wagers with other people that you'll lose weight.
The amounts wagered are quite nominal. $25 for a 30-day or 6-month weight-loss challenge. That is far less than the expected gains an overweight person would see from decreased health care costs. It's likely only a small fraction of the non-monetary value that a person who is 30-pounds overweight would find from dropping 15,20, or 30 pounds.
Yet - these bets work! But why? Why would such a small amount, likely 1/100 of the non-monetary value of the weight-loss to the overweight person induce people to lose weight? Behavioral economics has some insight.
People value losses more than they do an equivalent gain. This idea is called "loss-aversion", and was made prominent by Amos Tversky and Daniel Kahneman. (Kahneman won a Nobel prize in 2002. Tversky probably would have shared it with him, but he died young.) Through a series of clever experiments, they found that people value items more when they have them. That is, losing $25 would be more painful for a person than winning $25 is enjoyable.
Many people want to lose weight but they just can't stay motivated to eat right and exercise. But having a bit of money on the line - mainly because of the fear of losing it - can help people stay motivated and lose weight.
I am one of these people! I offered my fall 2014 class $100 if I couldn't drop down to 193 pounds from a starting weight of 207. Here is the progression of my weigh-ins throughout the fall semester.
Weight loss bets work!
For more, see this longer-article describing weight-loss bets in the NY Times.