Behavioral economics and selling voluntary benefits

Recently, National Public Radio featured a discussion of a University of Chicago study about the impact of short-term incentives on student performance. The introduction to the radio piece was along the lines of “does bribing kids to get better grades work?”

As a father of four, I certainly know that parents usually say it’s a bad idea to bribe children. But I also know that in reality parents bribe their kids all the time. If you don’t believe me, simply imagine the discussion about driving privileges between a teenager and their parent: “You can’t drive the car unless you keep your grades up.” (Parents everywhere give thanks to the auto insurance industry for good student discounts.)