Optimal combination of requirement and reward in financial incentive programs for weight loss

Overview & Synopsis

The paper analyzes how programs offering financial rewards for losing weight should be adapted to individuals' preferences. Specifically, we highlight the conditions under which demanding and highly remunerative programs or - conversely - easily achievable but less remunerative programs should be proposed. We show that financial incentives are more likely to encourage efforts to lose weight if the level of difficulty of the objective and the reward in case of success increase with: 1) the degree of risk seeking; 2) the degree of cross-prudence in quality of life. This suggests that individuals should be offered a weight loss program tailored to their preferences towards risk and correlation.