An Offer We Hope You Refuse

For years, Zappos—an Internet shoe and clothing retailer—has been offering its employees money to quit their job. From the initial $100, this one-time offer has now reached $2000. The stated purpose of the policy is to select enthusiastic employees, in the hope the other types will leave with the money. Shakespeare’s Henry V and Napoleon used similar screening mechanisms, offering their armies a passport and ‘crowns for convoy’ or a free shot if they wished to leave or even kill their leader.

In a recent paper, ‘Reactive Incentives: Harnessing the Impact of Sunk Opportunity Costs’, we explore a different effect of such temptations. Rather than simply screening ‘good’ types, an offer to quit may boost resolve and increase subsequent performance among those who stay. To test this proposition, we ran a field experiment in an Amsterdam gym from September 5th, 2015 to July 15th, 2017. In the experiment, new subscribers were randomly assigned to either one of several ‘temptation’ treatments—and made a varying one-time monetary offer to quit—or to a control group, who received no offer.