FAST SUMMARY - Mixed Signals - Uri Gneezy



The story you shared illustrates how regret can function as an incentive in making decisions. By buying lottery tickets every week, your grandfather was able to avoid the painful regret of possibly missing out on a win if he didn't purchase a ticket. The Postcode Lottery builds on this same psychology - making the prospect of regret very salient by publicizing who wins at a certain postcode. This intensifies the desire to participate in order to avoid potentially painful feelings of regret in the future if your neighbors were to win the big prizes. Regret acts as a powerful motivator in guiding both individual and market decisions. Understanding how to effectively leverage regret aversion can therefore be useful when designing incentive systems. The takeaway is that properly utilizing emotions like regret when structuring incentives can shape behavior to align with a preferred outcome.

The Simba Project offered financial incentives to Maasai elders to stop the tradition of warriors killing lions that attacked livestock. By compensating elders for lost livestock if no lions were killed, the incentives changed the payoffs and made not killing lions more attractive. This helped increase the local lion population from 10 to 65.

The project also had to deal with issues like insurance fraud and moral hazard that come with compensation programs. It employed verification officers and inspection requirements to address these.

To get the Maasai warriors on board, the project created an alternative "Simba Scouts" program that gave warriors a new role of protecting rather than killing lions. This reinvented their rite of passage while retaining cultural pride.

The practices around female genital mutilation (FGM) were also targeted for change. FGM leads to severe health consequences for Maasai girls and women. Prior efforts to end FGM through education and legal bans were unsuccessful. New financial incentives were designed to change the social norm by compensating families for not cutting their daughters.

Overall, carefully designed financial incentives succeeded in transforming some deep-rooted cultural practices that were harmful. By changing economic payoffs and incentives, new traditions replaced old ones. Both individuals and communities changed their behaviors.

The author and his team were in Kenya proposing an approach to stop female genital mutilation (FGM) among the Maasai people. FGM is an economic and social tradition, leading to higher dowries and status. Despite health risks, social pressure leads most parents to follow the tradition.

The team aims to change the incentives families face to give them an economic reason not to cut girls. The proposal is to pay for girls' high school tuition for 4 years if they remain uncut, checked annually. Educated girls have better job prospects and marriageability regardless of FGM status. This would give families an incentive to forego FGM to get their daughters an education.

The intervention targets a large fraction of girls to reduce peer pressure. It aims to change the social norm over time as educated girls refuse FGM and no longer see it as required for status. It resolves men's conflict between wanting wives who are healthy and socially accepted. Overall it uses education access as an alternate rite of passage.

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