In Singapore, rush hour at the Mass Rapid Transit trains can involve more body contact than a full on TSA pat down, the train so packed you will know whether the guy next to you had garlic toast for breakfast. Because of this crowding, someone in the Transit office decided to give people a 10% discount if they rode the trains during off-peak hours. But very few Singaporeans took the Transit folks up on this offer. Why?
Because the Transit system gave them another more exciting choice: As The New York Times reported recently (here), if commuters chose to ride during off-peak times, the Transit Authority gave them the opportunity to enter a daily lottery. While their odds of winning were small, especially compared to the certainty of a 10% discount, the sheer fun of entering a lottery—just for riding a train!—was hard to pass up.
As a result, rush hour commuting congestion in Singapore is down 10%.
Economics is the science of incentives. Behavioral economics tries to broaden our understanding of how humans respond to incentives, by accounting for the psychological forces that make one incentive more, um, incenty than another.