The Cobra Effect – how incentives can backfire

Sometimes a well-intentioned intervention can have the opposite effect to what it was designed for. Whenever you set out to change a problematic situation, you have to be very careful not to accidentally encourage something counterproductive. When an incentive accidentally backfires, we speak of the Cobra Effect. However, if you know how and when this effect occurs, you can avoid it.

Incentives are a great way to get people to act, but you have to be very careful in how you introduce the reward system. While incentives are powerful stimuli, they can easily backfire. When an attempted solution has the opposite effect, we speak of the Cobra Effect.

The Cobra Effect

‘The Cobra Effect’ refers to an infamous example of an incentive-gone-wrong. When the British ruled colonial India there were concerns about all the venomous cobras slithering around in Delhi. To reduce the cobra population, the government introduced a cash reward for any dead cobra that was brought in. Initially, the scheme seemed to work. Many dead cobras were indeed brought in. The number of snakes spotted in the city declined. However, judging by the countless dead snakes that kept on coming in, there seemed to be an endless supply. Eventually, the suspicious authorities figured out that cunning citizens had started breeding cobras to collect the generous rewards. The government quickly abandoned the scheme and stopped paying the bounty. As a result, many cobra farm owners released their now-worthless cobras. In the end, there were more cobras in Delhi than ever before.

The story of the cobra problem in Delhi serves as a cautionary tale for anyone who seeks to solve a complex problem using incentives. You get more of what you reward and this can easily lead to unforeseen consequences.

How much of the cobra story actually happened isn’t entirely clear, but the effect it describes is well documented. Let’s look at some other examples.

Rat tails in Hanoi

During French colonial rule the rat population in Hanoi was getting out of control. The French figured introducing a bounty system would quickly bring the rat infestation under control. Anyone who brought in a rat tail could collect a bounty. Similar to the cobra story, citizens eagerly took action. Thousands of rat tails were delivered to the city hall. This, of course, pleased the authorities. Sightings of rats without tails, however, led to some concerns. But it wasn’t until a few months later that they realized how bad the situation really was…

A health official who visited the suburbs of Hanoi, discovered -you guessed it- rat farms. Some entrepreneurial Vietnamese saw an opportunity and had started breeding rats. They cut off the tails but kept the mutilated rats alive to procreate. The French scheme not only failed to stop the rat infestation but actually increased the rat population.

The Cobra Effect doesn’t just occur when you deal with pests though. It can also lead to more traffic…

How restricting car use led to even more cars on the road

The incentive that proves problematic is not always as obvious as in the previous examples. Sometimes a seemingly reasonable intervention unintentionally incentivizes counterproductive behaviour.

Some cities have so much traffic that air pollution is becoming a serious problem. A program in Mexico City called ‘Hoy No Circula’ was meant to tackle this problem by restricting cars from being used on certain days of the week. Based on the last number on your licence plate, you are forbidden to use the car on one day of the week. For example, a car with a licence plate ending in a five or a six can’t be used on a Monday.

However, as many citizens wanted to be able to drive on every weekday, a lot of people purchased a cheap second car with a convenient licence plate. This way they could easily bypass the restrictions. Not only did this result in many more cars in the city, but it’s likely that the cheap extra cars are often much more polluting. To make matters worse; households that now had an extra car started driving more on weekends…

Ask yourself how your intervention might backfire

Think about how your intervention might accidentally reward counterproductive behaviour. Always do a potential-problem analysis before you implement any intervention and ask yourself what you are incentivizing. A potential-problem analysis allows you to identify possible pitfalls and enables you to design preventive measures and backup plans. This way you can avoid the Cobra Effect.

A better alternative

Changing behaviour is difficult and handing out cash rewards or prohibiting certain actions can be tempting. There is, however, a better alternative. If you want to change people’s behaviour but wish to avoid the Cobra Effect, try nudging! Nudging is a way of encouraging people to behave in a way that benefits them and their surroundings, without using rewards or restrictions.

 

Curious how nudges can help solve your challenges? Send me an email and I’ll gladly tell you how we might be of service.

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