For Better or Worse? Subjective Expectations and Cost-Benefit Trade-Offs in Health Behavior

Year: 2023
Author(s): Gabriella Conti, Pamela Giustinelli

We provide a framework to disentangle the role of preferences and expectations in health behavior, and apply it to compliance behavior during the acute phase of COVID-19. Employing rich data on subjective expectations collected during the spring 2020 lockdown in the UK, we estimate a simple model of compliance choice with uncertain costs and benefits, which we use to quantify the utility trade-offs underlying compliance, decompose group differences in compliance, and compute the monetary compensation required for people to comply. Individuals face intuitive trade-offs between costs and benefits of noncompliance, with the largest costs being the disutility of passing away from COVID-19 and the psychological cost of being caught transgressing, and the largest benefit being preserving own mental health. Yet, significant heterogeneity exists across groups, with women’s higher compliance being explained by gender differences in both preferences and expectations, while vulnerables’ higher compliance being mainly driven by differences in preferences. The response of individual behavior to others’ behavior also varies systematically across personal characteristics and circumstances. When others fail to comply – a high infection risk-low social trust scenario – individuals with no prior COVID-19 experience and those with higher risk tolerance react by complying less, consistent with conditional (lack of) cooperation; whereas the vulnerables react by complying more, consistent with a greater need of self-protection. When a high-level public figure breaks the rules, supporters of the opposing political party react by complying less, consistent with a breach of institutional trust. These findings emphasize the crucial need for design of public health policies to explicitly take into account behavior-relevant heterogeneity in citizens’ beliefs, preferences, and responses to others.

Gabriella Conti, Department of Economics, University College London.

Pamela Giustinelli, Department of Economics, Bocconi University.