According to the Boston Globe, co-founder of Gym-Pact Yifan Zhang, who calls the $25 charges "motivational fees," was inspired by his behavioral economics professor at Harvard, who taught that people are motivated more by short-term satisfactions than by long-term "possibilities."
Personally, I would not buy into such an exercise plan; although it may motivate somebody to exercise, fundamentally it looks like this: you pay to commit yourself to doing some work or else you have to pay more. I do, however, think that this business utilizes behavioral economics to its advantage, which has interesting business applications. Would "motivational fees" work for other businesses? Commit yourself to golf lessons! You've tried learning golf many times, but just kept on making excuses for your failure! If you miss one session, you'll pay even more!
What do you guys think? Would you join a program like this? Does this say anything about people being economically rational actors?
3 comments:
Well, the article does mention that the customers did agree to paying the $25 penalty when they initially signed up for the membership... so they're paying for what they're getting. I, personally, don't think I would join the program because it would require a commitment that I don't think I would be ready to commit to. And I don't think this would work well for other businesses too because, honestly, paying extra for the non-utilization of a service that you're already paying for is a little silly... although it would make things maybe a little more efficient.
Although I agree that if you think about it, it seems a little ridiculous to pay for non-utilization of a product/service you already paid for, I think that this program is actually interesting, and something that I would consider buying. If one looks at it solely in terms of monetary cost, it looks irrational to buy into this, but considering the other benefits, it's a good idea. In this case, the program forces people to do what's good for them. People who sign up for gym programs feel like they need exercise, but many times laziness gets the better of them, and they stop going to the gym. This program will force them to go to maintain their health, if they really care about their money. The worry of not wasting $25 serves as an incentive to go to the gym. This gives people who quickly lose their motivation to exercise a good reason to do so- if they don't exercise they will literally have to pay. Thus, I don't think that people who participate in this program are necessarily irrational economic actors- on the other hand, they could be thinking very rationally, in terms of long-term benefits, both economic and health-related.
I agree with Rashmi's sentiments, although I would like to point out that the "rational actor" assumption in classical economics assumes that people will always act in their own FINANCIAL interest. Therefore, when financial interests conflict with health interests, the rational actor assumption assumes that the person will act in his or her own financial interest.
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