Research: Why We’re Incentivized by Discounts and Surcharges

Everyday incentives typically come in one of two forms—discounts or surcharges—and are usually put in place for a simple reason: money motivates. And sure enough, it has been demonstrated time and time again that people change their behavior when they are financially incentivized: it’s pleasurable to earn money, and painful to lose it. But is it just the financial aspect that motivates us? Or is there something else influencing us too? Recent research suggests there is. In four studies, researchers find that the structure of an incentive—as either a surcharge or a discount—sends a subtle message to people about what others think and do. The work shows that when people encounter surcharges (vs. discounts), they perceive that the incentivized behavior is a stronger social norm.