This chapter discusses the role of nudge interventions, which are interventions that modify the choice architecture without intervening in the actual choice set. We use nudges when we make subtle changes to the way choices are presented to individuals (the choice architecture). Such small changes are expected to encourage predictable behaviour and assist individuals in achieving goals that they desire. In general, it refers to interventions that, while preserving individuals' freedom of choice, steer them in a specific (socially desirable) direction, thereby improving welfare by assisting individuals in achieving welfare-improving goals (as judged by themselves). Individuals can continue to make whatever choices they want; they can always opt out of a default environment that steers them. Nudges preserve choice and can have a significant impact on our behaviour. They are appealing because they influence behaviour without using regulation or monetary incentives, and they are relatively inexpensive interventions. This chapter attempts to provide an overview of how to change the choice architecture by utilizing well-established cognitive biases discussed in this book.

Monetary incentives or financial rewards are an external financial stimulus that influences the ‘relative price’ of a behaviour relative to the status quo. They reduce (e.g., subsidy, cash transfer) or increase (e.g., co-payment, coinsurance, tax or a penalty) the costs of action or inaction. These incentives can be implemented ex-post or at the point of use (e.g., a user fee), or ex-ante or, before its use (e.g., insurance coverage). Although, the logic that explains the effectiveness of such incentives in the context of health and health care has been long established, its behavioural mechanisms are still subject to discussion and are far from clear-cut. This chapter attempts to shed some light on the matter, and broadly analyse when ‘monetary incentives work’ and what can make them ‘backfire’. In designing incentives, we will expand on the concept of motivation compatibility.

This chapter focuses on describing the conditions under which monetary incentives (M) do not work, and more specifically claims that when considering monetary incentives, other non-monetary or social incentives (S) that help overcome people's cognitive hurdles to engage in desirable health and healthcare behaviour should be combined with them. According to contract design theory, when quality is not observable, we face significant challenges in designing healthcare contracts. This is important in incentive design. The problems we typically face in these circumstances are that the outcomes for which we design the incentives are not always easy to observe. Contracts based on trust appear to be more appropriate in these circumstances.

This chapter goes over the decision to purchase health insurance (or not). The way information is presented to individuals has a significant impact on their decision to purchase insurance to protect themselves from the financial consequences of health risks. Eliminating minor inconvenience costs or simplifying the insurance selection process can influence whether or not people purchase insurance. This chapter examines the roles of adverse selection and moral hazard in insurance-related behaviour, as well as the barriers to insurance uptake for individuals ranging from affordability to unobservable quality and information/choice overload. The chapter investigates the role of various nudges in increasing health insurance uptake.

The normal operation of healthcare systems necessitates a variety of pro-social behaviours. There is usually a chronic shortage of organs to transplant, blood from donors of specific types, and other biological material donations that make a huge difference in people's lives, such as breast milk donations, which are critical for feeding premature children. This chronic shortage is distinguished by the fact that demand is consistently far greater than supply. Hence a question this chapter will try to address is how can we incentivise desirable pro-social behaviours? How do individuals react to health inequality? How should social decision-making be reconsidered when we consider the fact that individuals face cognitive biases? Social preferences include certain types of pro-social behaviours such as altruism and reciprocity, as well as a genuine preferences against inequity. The chapter discusses explanations for social preference behaviours and the motivation and incentives of pro-social behaviours and the role of altruism in health. Finally, we examine inequality aversion, namely how sensitive people are to inequality.

This chapter provides an introduction to behavioural health economics. Far from attempting to replace what we know about health economics as a discipline, behavioural health economics aims at complementing its foundations by relaxing some of its core assumptions. This implies taking a more ‘realistic depiction’ of individual motivation even though it makes it more complex work beyond simple mathematical formulation. By incorporating what are otherwise anomalies of rational decision-making (defined as purposeful decision-making), health economics can go the extra mile with this extended toolkit which we define as behavioural health economics. Our agent is constrained by the social norms of its place and suffers from status quo bias and endowment effects that introduce bias into making decision and evaluations. ‘Real individuals’ care about others and have social preferences with regard to other people’s well-being, and often suffer from self-control problems, where impulsivity and emotion translate into suffering from a specific form of short sightedness otherwise known as ‘present bias’). These problems are arguably more prominent in the health domain. Market price is not the only relevant variable guiding behaviour in health and health care, where insurance is the most common form of payment, and tangible monetary incentives are often not made salient to influence behaviour.

This chapter focuses on how patients use health-care services. It addresses screening and medication adherence, vaccination (including COVID-19), and self-management of chronic diseases. The realities of health-care decision-making include both direct and opportunity costs (e.g. time it takes for screening, preparing for screening, side effects).This chapter begins with the biases that influence patients’ decisions about healthcare use including preventative care and self-management. Then, with an understanding of how these biases emerge in many contexts, the chapter discusses tools from behavioural economics that could help. Finally, the chapter goes through several examples where we know something about how behavioural economics can help (or not!).

The chapter focuses on how the behavioural insights discussed in previous chapters affect policy, and how policy can use behavioural incentives to be more effective. It offers examples of policy interventions that have been successful in settings around the world. It provides some history and context for the proliferation of behavioural economics-related efforts in policy and in heath policy specifically. It describes four of the frameworks used to describe policymaking with behaviour in mind; MINDSPACE, COM-B, EAST and BASIC. It includes examples from international contexts where behavioural health policies have been enacted.

This chapter examines several behavioural regularities explaining health behaviours that provide alternative behavioural explanations of actual preventative choices (e.g., smoking, weight loss, exercise, safe sex). The chapter discusses the roles of taxes and information and how social incentives and designs that incorporate social and monetary incentives keeping in mind biases such as loss aversion can help change behaviour. The chapter describes biases related to prevention failures such as optimism, present and status quo biases and includes examples of prevention failures in health-related behaviours.

This chapter discusses how time preferences influence the importance of and actions regarding old age health as well as factors behind taking up protective measures against the financial risks of care at old age. We discuss the complexity of planning for old age including the challenges related to our imperfect ability to predict the future or what our preferences for the future will be when making decisions today. We include the role of social norms and family experience in decision-making as well as the cognitive demands required of old age planning. We also incorporate the roles of biases such as optimism and present bias as well as risk denial and procrastination into decision-making about ageing. The chapter finishes with a consideration of nudges appropriate to this context.

The purpose of this chapter is to investigate the role of social incentives, specifically how changes in the social environment such as esteem, identity, cultural social norms, and social reference points affect individuals' behaviours. We will look into the role of envy and guilt as behavioural motivators, as well as the role of social norms as external signals and constraints on people's behaviours. Human interaction produces norms and social divisions, which create disutility or utility (oppositional or transgressive norms). Social norms are informal rules that govern behaviour in society and include shared social values, beliefs, attitudes, and/or behaviours. Social incentives are defined as "extraneous non-monetary stimuli" that influence an individual's perceived marginal benefit or cost of effort. Social incentives operate through social norms, social image, herd or social multiplier effects, narratives and can be strengthened through praise, attention, esteem, sense of belonging, feelings of meaning and loyalty. Stigma and status both are part of what we can define more widely as ‘esteem’, and can be both a positive or negative, and influence behaviour very much like a price in a market.

This chapter examines the role of behavioural incentives as influencing healthcare delivery. It describes decision-making in clinical contexts and the roles of biases that naturally occur in these settings. Sometimes these have negative impacts (e.g., medical errors) and other times positive impacts (e.g., role of social norms for positive change). Pay for performance (P4P) programmes are discussed in this context. This chapter also includes examples of interventions such as defaults in the electronic health record and how antibiotic prescribing programmes that use social norms can be important to change behaviours. However, they need to be applied carefully and in concert with clinical collaboration.

This chapter examines how individuals learn, and the biases and models that help expression information updating. Learning is arguably central of the effect of behavioural incentives, as incentives are behavioural stimuli, yet stimuli need to be perceived and hence learned about for them to exert an effect. This applies to monetary and social incentives as well as nudges. In a way, behavioural incentives are about understanding how making learning easier matters, such as making some stimuli more salient by priming them or priming a social norm. Learning often affects narratives which give structure to actions and gives rise to what we call confirmation biases. Learning is affected by people’s priors (views of the world people have before processing information), namely what they already know, their attitudes towards absorbing new information, trust, the credibility they attached to different information sources, and the need to understand new information to learn about something. Finally, individuals tend to learn from others. Learning is thus more than the process resulting from verbal or written messages. It might also result from emulation, opposition to others’ behaviours, or concerns about the judgement of others, to avoid shame or seek status.