JOURNAL OF THE EXPERIMENTAL ANALYSIS OF BEHAVIOR 2013, 99, 98124 NUMBER 1 (JANUARY)

BEHAVIORAL ECONOMICS AND EMPIRICAL PUBLIC POLICY

STEVEN R. HURSH AND PETER G. ROMA
INSTITUTES FOR BEHAVIOR RESOURCES
AND
DEPARTMENT OF PSYCHIATRY AND BEHAVIORAL SCIENCES, JOHNS HOPKINS UNIVERSITY SCHOOL OF MEDICINE

The application of economics principles to the analysis of behavior has yielded novel insights on value and
choice across contexts ranging from laboratory animal research to clinical populations to national trends of
global impact. Recent innovations in demand curve methods provide a credible means of quantitatively
comparing qualitatively different reinforcers as well as quantifying the choice relations between
concurrently available reinforcers. The potential of the behavioral economic approach to inform public
policy is illustrated with examples from basic research, pre-clinical behavioral pharmacology, and clinical
drug abuse research as well as emerging applications to public transportation and social behavior.
Behavioral Economics can serve as a broadly applicable conceptual, methodological, and analytical
framework for the development and evaluation of empirical public policy.
Key words: behavioral economics, demand curve, exponential model, essential value, reinforcer
interactions, choice, public policy

The contribution of Psychology proper to defined as objects of scarce consumption by

Economicswhat most economists and social
scientists would recognize as Behavioral Eco-
nomicsis largely limited to cognitive process-
ing hypotheses of why humans actual financial
behavior so often violates the assumptions and
models upon which neo-classical economic
theory is built, that is, the behavior of economics
(Thaler & Mullainathan, 2008). In contrast,
Behavioral Economics within Psychology is
generally defined as the application of econom-
ic principles as a means of understanding
behavior (typically reinforcement) in animals
and humans, that is, the economics of behavior. Of
course, there are several points of convergence
between economics and behavioral psychology.
One is a common interest in the value of goods,
defined as reinforcers by the behaviorist, and
Preparation of this manuscript and portions of data
collection were supported by intramural funds from the
Institutes for Behavior Resources, the US National Space
Biomedical Research Institute through NASA NCC 9-58-
NBPF01602 (Joseph V. Brady and PGR) and Directed
Research Project NBPF00008 (PGR), and US National
Aeronautics and Space Administration grant NNX13AB39G
(PGR). Some content composed by SRH also appears in
Hursh, Madden, Spiga, DeLeon, & Francisco (2012), The
translational utility of behavioral economics: The experi-
mental analysis of consumption and choice, in G. J. Madden
(Ed.), APA Handbook of Behavior Analysis: Vol. 2. Translating
Principles Into Practice.
Address correspondence to Dr. Steve Hursh or Dr. Pete
Roma, Institutes for Behavior Resources, 2104 Maryland
Avenue, Baltimore, MD 21218, USA (e-mail: srhursh@ibrinc.
org or peteroma@gmail.com).
doi: 10.1002/jeab.7
economists. A second point of convergence is
an interest in the process of choice: For the
economist, the allocation of limited resources to
the consumption of competing goods in the
marketplace (consumer choice), and for the
behaviorist, the division of operant behavior
among competing reinforcers.
Indeed, the blending of behavioral principles
with microeconomic theory has been a fruitful
area of research (Green & Freed, 1998;
Hursh, 1980, 1984; Hursh & Bauman, 1987;
Kahneman, Slovic, & Tversky, 1982; Lea, 1978;
Rachlin & Laibson, 1997) and provides a
translational framework for extending princi-
ples derived from laboratory studies to an
understanding of consumer choice observed
in whole communities and the influence of
governmental policies on those choices. In this
exposition we will focus more on the application
of economic methods of analysis and consistent
functional relations than on hypothetical eco-
nomic concepts such as utility functions, indif-
ference curves, and optimal choices in the
consumer marketplace (Watson & Holman,
1977). What emerges is an important extension
of behavioral principles and a broadly applica-
ble framework for empirical public policy.
Concepts of behavioral economics have
proven useful for understanding the environ-
mental control of overall levels of behavior for a
variety of commodities in closed systems (Bickel,
DeGrandpre, Higgins, & Hughes, 1990, 1991;
Foltin, 1992; Hursh, 1984; Lea, 1978; Lea &
 EMPIRICAL PUBLIC POLICY
Roper, 1977; Rashotte & Henderson, 1988)
and the factors that control the allocation of
behavioral resources among available rein-
forcers (Hursh, 1980, 1984; Hursh & Bauman,
1987). Behavioral economics as practiced by
students of operant conditioning and behavior
analysis has borrowed concepts from microeco-
nomics, especially consumer demand theory
and labor supply theory (Allison, 1983; Allison,
Miller, & Wozny, 1979; Green & Freed, 1998;
Lea, 1978; Rachlin, Green, Kagel, & Battalio,
1976; Staddon, 1979; see Watson & Holman,
1977 for a review of relevant microeconomic
theory). When applied in laboratory experi-
ments, economic concepts are operationalized
in special ways that build on more fundamental
behavioral processes such as reinforcement,
discrimination, differentiation, and the like.
These experiments have directed our attention
to new phenomena previously ignored and new
functional relations previously unnamed. As
applied here, behavioral economics is focused
on the analysis of consumption of various
reinforcers and the responding that produces
that consumption.
This review provides some basic definitions
and demonstrates how those concepts can be
applied to retrospective and prospective public
policy research, development, and evaluation.
We draw on available evidence from laboratory
and clinical settings and will use those results to
illustrate extensions to human behavior in
larger populations and communities. Based on
the preponderance of research and public
health policy initiatives of particular interest to
us, our presentation relies heavily on the
behavioral pharmacology and drug abuse litera-
ture, and is by no means exhaustive. However, a
founding principle of this behavioral-economic
approach is the broad applicability of the
underlying concepts and techniques, and as
such, we also incorporate a variety of hypotheti-
cal examples, as well as emerging applications of
behavioral economics to other research and
policy-relevant domains.
The Value Of Reinforcers
One of the most important contributions of
behavioral economics has been to redirect our
attention to total daily consumption of rein-
forcers as a primary dependent measure of
behavior and the way consumption varies with
the cost of reinforcers. Ultimately, the shape of
99
the relationship between cost and consumption
provides a fundamental definition of the value
of reinforcers. In this context, responding is
regarded as a secondary dependent variable
that is important because it is instrumental in
controlling consumption of valued reinforcers.
In order to study the fundamental relationship
between responding and consumption in the
laboratory, control of deprivation has been
eliminated and subjects are allowed to control
their own level of consumptionwhat Hursh
(1980) has termed a closed economy. A wide
range of studies have documented the behav-
ioral adjustments that occur in closed econo-
mies, especially when the reinforcers are
biological necessities like food or water that
are physically consumed (see Bauman, 1991;
Collier, 1983; Hall & Lattal, 1990; Hursh,
1978, 1984; Hursh & Natelson, 1981; Hursh,
Raslear, Bauman, & Black, 1989; Hursh, Raslear,
Shurtleff, Bauman, & Simmons, 1988; LaFiette
& Fantino, 1989; Lucas, 1981; Roane, Call, &
Falcomata, 2005). Studies of food reinforce-
ment in closed economies demonstrate strik-
ingly persistent behavior that is very resistant to
the effects of reinforcer cost (see Bauman, 1991;
Foltin, 1992; Hursh, 1978). Other studies in
which subjects are permitted to self-administer
psychoactive drugs have shown similar rela-
tions with sensitivity to cost varying with the
characteristics of the drug (Griffiths, Bigelow, &
Henningfield, 1980; Hursh & Winger, 1995;
Johanson, 1978).
Demand Curve Analysis
The relationship between reinforcer cost
and reinforcer consumption is known as a
demand curve, a term adopted directly from
traditional economics. As the cost of a com-
modity increases, consumption generally de-
creases, as illustrated in Figure 1 (left panel).
The rate of decrease in consumption (sensi-
tivity to price) relative to the initial level of
consumption is called elasticity of demand. When
consumption remains inflexible or declines
slowly with proportionately large increases in
price, we define that as inelastic demand. For this
to occur, total responding must increase with
increases in cost, as seen in the right panel of
Figure 1. For example, when the price of
gasoline increased by 300% during the 1970s
from 33 cents per gallon to over one dollar per
gallon, consumption decreased by only 10%.
100 STEVEN R. HURSH and PETER G. ROMA

Fig. 1. Left Panel: Diagrammatic demand curve showing the usual shape and increasing elasticity across the demand
curve. The vertical line marks the point of unit elasticity (slope 1) which is the transition from inelastic to elastic demand.
The level of demand is denoted as the y-intercept or the quantity consumed at zero price (Q0). Right Panel: Diagram of total
daily consumption that would be required to support the levels of demand shown in the left panel. The vertical line marks the
point of unit elasticity and the peak response output (Omax). The price at that point is called Pmax.

This near-fixed level of consumption despite
rising prices was an example of inelastic
demand, and the result was that a larger share
of household budgets was allocated to gasoline
than was before the price increase. Other
commodities, such as luxury goods (e.g.,
vacation travel) or goods with many substitutes
(e.g., bottled water), have steeply sloping
demand curves illustrating their flexible pat-
terns of consumption. Demand for such goods
is generally elastic, as consumption is highly
sensitive to price.
The difference in demand between elastic
and inelastic goods is easily demonstrated in the
laboratory. Figure 2 depicts the consumption by
monkeys of saccharin sweetened water with an
alternative source of water and consumption of
food pellets without alternative food. The

Fig. 2. Left Panel: Two demand curves by rhesus monkeys working for either food (squares) or saccharin sweetened water
(triangles). The functions show the total number of reinforcers earned (Consumption) each day under a series of fixed-ratio
(FR) schedules (Prices) that ranged from FR 10 to FR 372. Right Panel: Daily output of responding that accompanied
the levels of consumption shown in the left panel. The curves were fitted with an exponential equation (Hursh &
Silberberg, 2008).
 EMPIRICAL PUBLIC POLICY
demand curve for saccharin is generally elastic
and is steeply sloping; the curve for food is
generally inelastic and decreases more slowly
with increases in price of the respective
reinforcers. In the figure, the price of each
commodity was gradually increased from ten
responses per reinforcer to over 372 responses
per reinforcer in a closed economy. As a
corollary to the differences in the demand
curves, total responding for food increased over
a broad range while responding for saccharin
generally decreased over the same range.
The distinction between elastic and inelastic
reinforcers may be viewed as binary, with elastic
demand emerging at the point when a 1%
increase in price produces >1% decrease in
consumption; however, elasticity in general rests
along a continuum anchored by extreme elastic
and inelastic demand. Assuming a finite budget,
consumption of all reinforcers becomes elastic if
the price is elevated sufficiently; the difference
between reinforcers can be specified in terms of
the price at the point of transition between
inelastic and elastic demand and coincides with
the peak of the response rate functions (Pmax)
shown in the right panel of Figures 1 and 2
(dashed lines). If that transition occurs at
relatively low prices, then demand for that
reinforcer is generally more elastic than de-
mand for a reinforcer that sustains response
increases (thus maintaining consumption lev-
els) over a broad range of prices. As we will see
later, there is a mathematical model that fits
these curves and the rate constant in the model
determines the Pmax value.
Demand curves for drug reinforcers conform
to the same nonlinear, decreasing function
typified by those in Figure 2 and responding
is an inverted U-shaped function of price
(see below for details; also see review by
Bickel et al., 1990). As discussed by Bickel,
DeGrandpre, and Higgins (1993) and in later
sections of the present report, elasticity of
demand may be a useful basic metric for
comparing the value of different reinforcers,
such as the abuse liability of drug reinforcers,
and for assessing the potency of interventions to
reduce demand for drugs and other reinforcers.
The Exponential Model of Demand
Hursh and Silberberg (2008) formally intro-
duced the Exponential Model of Demand as a
novel approach to defining and quantifying
101
reinforcement. At its heart, the Exponential
Model is a way to quantify and generalize the
relations illustrated in Figure 2. Any quantifiable
risk of lossbe it physical effort/energy, time,
money, professional stability, or social relation-
shipscould qualify as price. Similarly, pro-
curement of anything of value, including the
aforementioned variables (effort, time, money,
etc.), could qualify as consumption. Indeed, this
generalizability is a fundamental principle that
defines the behavioral psychology school of
behavioral economics. In the operant paradigm,
price is usually modeled by fixed-ratio response
requirements per reinforcer delivery, and con-
sumption is usually the total number of rein-
forcers earned at each price.
Within this theoretical framework, reinforce-
ment is not defined by consumption at any one
price, the price at which maximum consump-
tion occurs, or the highest price at which any
consumption occurs. Rather, reinforcing effica-
cy is defined by sensitivity to price as derived
from changes in consumption across the entire
range of prices. As illustrated in Figure 2,
reinforcer efficacy is defined in terms of the
rate of change in consumption with increases in
price and is both conceptually and computa-
tionally independent of reinforcer size/dose
effects seen in absolute level(s) of consumption.
In principle, the inelastic/inflexibly-consumed
item (food in Figure 2) is more reinforcing than
the elastic/flexibly-consumed item (saccharin
in Figure 2), so one could argue based on these
patterns that food is more reinforcing than
saccharin. But how best to quantitatively express
this relationship? Under traditional methods,
the question is seriously confounded by the fact
that the reinforcers are qualitatively different:
Even though saccharin squirts and food pellets
differ from each other at all price points, the
prices themselves and the units of consumption
cannot be directly compared. The Exponential
Model of Demand accounts for baseline differ-
ences in absolute consumption while defining
reinforcement independent of reinforcer type,
unit size, or consumption and price at any one
point along the curve, providing a quantitative
comparison of reinforcer values that is indepen-
dent of intrinsic differences in the physical
properties of those reinforcers.
As depicted in Figure 2, demand curves
are seldom linear, so precisely specifying
slope requires a nonlinear function. A basic
exponential function appears to adequately
102 STEVEN R. HURSH and PETER G. ROMA
describe most demand curves when plotting the
log of consumption as a function of cost (Hursh
& Silberberg, 2008):
 
logQ logQ 0 k e aQ 0 C 1 1 parameter. With differences in baseline consump-
The independent variable is Cost (C) mea-
sured either as responses or units of time per
reinforcer. Log of consumption (log Q) is a
function of Cost and is maximal at zero cost
(log Q0) and specifies the highest level of
demand. The rate constant a (alpha) deter-
mines the rate of decline in relative consump-
tion (log consumption) with increases in cost
(C). The value of k is a scaling constant that
reflects the range of the consumption data in log
units and is generally set to a common constant
across comparisons. The slope of the demand
curve, elasticity, when k is constant, is deter-
mined by the rate constant a. The value of a
then forms the basis for defining the essential
value of the reinforcer via sensitivity of con-
sumption to changes in cost.1
The Exponential Model is a descriptive rather
than predictive model. In practice, once a
demand curve is measured, both price and
consumption are known and the model is fitted
to the results to find the values for the para-
meters that account for as much variance as
possible in the fixed data of the empirical
demand curve; these values then form the
quantitative basis for defining reinforcing effi-
cacy. To this end, the two key parameters for
applying the Exponential Model are Q0 and a.
The Q0 parameter is a single number generated
for each demand curve that represents pre-
dicted consumption at zero price based on the
trajectory of the curve. Simply put, Q0 equals
baseline consumption when the goods are
free. Unencumbered by effort or cost, Q0
mathematically isolates the effects of reinforcer
magnitude (e.g., 2% vs. 4% vs. 8% alcohol),
qualitative differences (e.g., g/kg alcohol vs.
mg/kg cocaine), and individual differences in
underlying physiology (e.g., male vs. female
absorption rates) that often confound interpre-
1
A custom-programmed Exponential Model analysis and
graphing template for GraphPad Prism 5 is freely available
upon request to the authors or via the Institutes for Behavior
Resources website (http://www.ibrinc.org/index.php?id
181).
tation of motivational effects in traditional
measures of relative reinforcing efficacy.
This leaves us with the most important term in
the model, and certainly the most unique: the a
tion isolated in Q0, the a parameter and
derivatives thereof (e.g., 1/a; Banks, Roma,
Folk, Rice, & Negus, 2011; Bidwell, Mackillop,
Murphy, Tidey, & Colby, 2012) define reinforcing
efficacy by quantifying sensitivity to price, or
elasticity of demand, across the entire range of
prices. Reinforcer efficacy is challenged across a
wide range of prices, and indeed elasticity itself is
not constant across all adjacent price points, as
shown in Figures 1 and 2. The Exponential Model
takes shifting elasticity into account when fitting
the a parameter, and the result is a fundamentally
unique quantitative definition of reinforcing
efficacy reflecting sensitivity to price.
Larger values of a reflect steeper demand
curves and less essential value, and small a values
come from shallow demand curves. Thus, a
values are inversely related to essential value. A
less comprehensive but arguably more intuitive
measure of essential value, and one which may
be derived from a, is the price at the point of
unit elasticity, as depicted in Figures 1 and 2,
called Pmax.2 Pmax is inversely proportional to a
and can be found using the following approxi-
mation3:
P max 0:65=aQ 0 k 1:191 2
Perhaps the most compelling feature of the
exponential model is that because the effects of
reinforcer magnitude/dose/etc. are mathemat-
ically isolated in Q0, the a parameter putatively
represents the absolute and theoretically con-
stant reinforcing efficacy of the commodity. This
2
Other potentially useful metrics are consumption at Pmax
which is found by solving Equation 1 with C Pmax; and
Omax, peak response output which is found by taking the
solution of Equation 1 with C Pmax and multiplying this
level of consumption by Pmax.
3
Because Q0 appears twice in the first derivative of
Equation (1), there is no closed form solution for Pmax,, price
at which the first derivative of Equation (1) 1, and exact
Pmax values can only be found using an iterative solver.
However, Equation (2) provides a close approximation
within a specified range of values of k. The expression
approximates Pmax with a precision that is virtually exact for
k 5. The error increases with expanded range, and is thus
within / 2% for 2
k
6 and within / 5% for
1.8
k
8, with an average error of 1.5% for 2
k
6.
 EMPIRICAL PUBLIC POLICY
Fig. 3. Demand curves (see equation 1) fitted to average consumption of four doses of the opioid drug Alfentanil self-
administered by rhesus monkeys (data from Ko et al., 2002 as re-analyzed by Hursh & Silberberg, 2008).
is what Hursh and Silberberg (2008) term the
essential value of the reinforcer.
This principle was demonstrated in their
reanalysis of Ko, Terner, Hursh, Woods, and
Wingers (2002) monkey self-administration
data of the opioid drug Alfentanil. As seen in
the demand curves presented in Figure 3, there
was an orderly inverse relationship between
dose and baseline consumption, as reflected in
Q0, presumably reflecting the need for more
infusions of the lower doses to achieve the same
effect as fewer infusions of the higher doses.
With the dose effects relegated to Q0, the
essential value of the drug (as derived from a)
was revealed as constant across all doses.
If dose effects and other confounds can be
reasonably isolated in Q0 and the essential value
of a reinforcer is presumed stable at any given
time, then any differences or changes in a
between reinforcers or across sessions and
conditions are that much more meaningful.
Quantitatively, a large a indicates high sensitivity
to price, and thus low essential value, whereas a
small a indicates low sensitivity to price, and thus
high essential value. In colloquial terms, re-
inforcers with high essential value are insensitive
to price because they are worth fighting for,
motivation to sustain baseline levels of con-
sumption (Q0) is strong enough to warrant
paying any price, whereas commodities of low
essential value are weaker reinforcers because
the preferred level of consumption is not worth
defending.
103
Based on data from multiple animal experi-
ments conducted over the years, Equation 1 has
been applied to a range of reinforcers and
values of a have been determined. Figure 4
summarizes the findings from those experi-
ments ordered in terms of 1/a so that larger
numbers indicate higher essential value. Note
that alfentanil and remifentanil are two power-
ful opioid reinforcers with equal essential value
and yet they differ by an order of magnitude in
potency, supporting the notion that essential
value is independent of scalar properties of
reinforcement. Perhaps most importantly, note
that drug and nondrug reinforcers are inter-
spersed throughout the array indicating a range
of essential values across commodities. The
beauty of the Exponential Model, and we believe
its promise, lies not only in its unique definition
of reinforcement, but in its inherent ability to
provide a credible means of quantitatively
comparing qualitatively different reinforcers.
Under appropriately controlled conditions, one
could quite literally compare apples to oranges!
Demand and Choice
One way to conceptualize demand is as a
choice between engaging in activities to acquire
one commodity versus engaging in other
activities to acquire another commodity. For
example, a person is usually not offered a single
option to obtain food, but rather multiple
choices to earn a range of different foods. The
104 STEVEN R. HURSH and PETER G. ROMA

Fig. 4. Essential value of various reinforcers in animals based on reanalysis of archival laboratory data. Note that free
food refers to the indicated portion of maximum daily food amounts being offered after experimental sessions where food
was earned under FR schedules.

elasticity of demand for one food is dependent
in part on the price and availability of other
foods (cf. Oliveira-Castro, Foxall, Yan, & Wells,
2011). This is just one example of a more
general set of interactions that can occur among
commodities available simultaneously or se-
quentially in the course of an organisms
interaction with the environment (Green &
Freed, 1993). Within a behavioral economic
framework, reinforcer interactions are classified
into several categories, as illustrated in Figure 5.
Most studies of choice with animals have
arranged for the alternative behaviors to
provide the same, perfectly substitutable rein-
forcerusually food. This yields a specific kind
of interaction in which the amount of behavior
to each roughly matches the amount of rein-
forcement received from each (the matching law,
see Davison & McCarthy, 1988). When the two
alternatives require a specific number of re-
sponses per reinforcer delivery, the subjects
generally show exclusive preference for the least
costly of the alternatives (Green, Rachlin, &
Hanson, 1983; Herrnstein, 1958; Herrnstein
& Loveland, 1975). This situation is akin to
comparison shopping for identical items from
different stores: All else being equal, one will go
to the store with the lowest price.
Most choices in the natural economy are
between commodities that are not perfect
substitutes. The other interactions depicted in
Figure 5 are imperfect substitutes, comple-
ments, and independent reinforcers. Figure 6

Fig. 6. Diagram of hypothetical changes in consumption

of commodity B as a function of the price of commodity A.
Fig. 5. Diagram of four hypothetical forms of reinforcer The solid line indicates a complementary relation; the
interactions (see text for explanation). dashed line indicates a substitutable relation.
 EMPIRICAL PUBLIC POLICY 105

illustrates the difference between imperfect
substitutes and complements. Along the xaxis
is the price of commodity A; along the yaxis is
consumption of the alternative fixed-price
commodity B. As the price of A increases,
consumption of A decreases (the usual demand
relation, not shown). If, at the same time, the
consumption of fixed-price commodity B in-
creases in response to the increasing price of A,
then B is defined as a substitute for A. If the
consumption of B decreases along with in-
creases in the price of A, then B is defined as a
complement of A.
Choice between two substitutes and com-
plements is exemplified in Figure 7 (Spiga,
Martinetti, Meisch, Cowan, & Hursh, 2005;
Spiga, Wilson, & Martinetti, 2011). Here,
human subjects chose between reinforcers
available after pressing one lever under an
increasing series of FRs. The other alternative
was a different commodity available under
a constant FR schedule. In the experiment
depicted in the left panel, subjects could
respond for the opiate drug methadone alone
or in comparison with another opiate, hydro-
morphone, an imperfect substitute. As the price
of methadone increased and methadone con-
sumption decreased, consumption of hydro-
morphone increased as a partial substitute. The
elasticity of demand for methadone was greater
with hydromorphone concurrently available
than when methadone was offered alone. This
reciprocal tradeoff between consumption of
two reinforcers is typical of imperfect substi-
tutes. In the experiment depicted in the right
panel, subjects could respond for a drink of
ethanol alone or in comparison with cigarette
puffs. As the price of ethanol increased and
ethanol consumption decreased, consumption
of cigarette puffs also decreased even though
the price of cigarette puffs remained constant,
suggesting that the reinforcing value of ciga-
rettes is enhanced by concurrent ethanol. This
parallel pattern of consumption between two
reinforcers as the price of only one increases is
indicative of a complementary relationship.
Own-price and cross-price elasticity. Own-
price elasticity of demand refers to the slope of
the demand curve for a commodity when
plotted in the usual loglog coordinates and
reflects proportional changes in consumption of
the commodity with proportional changes in its
own price. The Exponential Model of Demand
presented in equation (1) provides a method for
quantifying and comparing own-price elastici-
ties. The faster elasticity increases with price, the
greater the elasticity is at any given price. As
described above, the a parameter of the
demand equation represents the rate of change
in elasticity of demand and is a convenient
parameter for comparison across conditions
and experiments.

Fig. 7. Left panel: Substitutable reinforcer interaction demonstrated by mean daily consumption by human subjects of
methadone and hydromorphone as a function of the unit price (FR schedule) for methadone. Right panel: Complementary
reinforcer interaction demonstrated by mean consumption by human subjects of alcohol (ethanol solution) and nicotine
(cigarette puffs) as a function of the unit price (FR schedule) for nicotine.
106 STEVEN R. HURSH and PETER G. ROMA
Extending the model to accommodate choice
procedures with concurrent reinforcers, cross-
price elasticity of demand is the slope of the
function relating the consumption of a fixed-
price commodity to the changes in price of
another commodity (see Figure 7). As suggested
above, if this function has positive slope, then
the fixed-price alternative commodity is termed
a substitute for the primary commodity (Fig-
ure 7, left). If the slope is negative, then the
fixed-price alternative is termed a complement
of the primary commodity (Figure 7, right). If
the slope is zero, then the reinforcing efficacies
of both commodities are considered indepen-
dent of each other.4 Mathematically, an exten-
sion of exponential demand may be used to fit
cross-price demand curves such as those in
Figure 7 for hydromorphone (substitute for
methadone) or for ethanol and cigarettes
(complements to each other):
Q logQ al one I e bC 3 justified by it medical use.
where Qalone is the maximum level of consump-
tion for the fixed-price alternative commodity
when the price of the primary commodity is
infinity (i.e., zero demand at the right end of the
function rather than the left), I is the interaction
constant, b is the sensitivity of fixed-price
commodity consumption to the price of the
primary commodity, and C is the cost of the
primary commodity. With methadone versus
hydromorphone, the interaction term I was
negative (-3.04), indicating a reciprocal or
substitution relationship between consumption
of the two commodities; in choice between
ethanol and cigarette puffs, the interaction term
I was positive (0.63) indicating a parallel or
complementary relationship between consump-
tion of ethanol and cigarettes.5
4
A custom-programmed Cross-Price Elasticity analysis and
graphing template for GraphPad Prism 5 is currently being
developed and may be available upon request from the
authors.
5
If the prices of both commodities are changing, then
equation (3) can be expanded by replacing the log(Qalone)
term for consumption of one commodity at a fixed price with
equation (1) for consumption of that commodity with
variable pricing. This expanded form provides an economic
foundation for determining choice ratios as the ratio of
several such expanded demand equations, a topic beyond
the scope of this chapter.
The Behavioral Economics of
Addiction and Treatment
Drug Abuse Liability Assessment
The rank ordering of drug and nondrug
reinforcers by essential value has direct applica-
tion for the assessment of abuse liability and the
application of public policy for the control of
certain medications. The Federal Drug Admin-
istration applies certain control mechanisms on
the prescription, sale, and distribution of drugs
that depends in part on the potential that the
drug might lead to excessive use, dependence,
and addiction, especially when such use would
have adverse health effects on abusers and/or
impose a burden on society that is dispro-
portionate to the therapeutic benefit of the
medicine. Virtually all drugs which have effects
on the central nervous system must be assessed
for their potential to serve as a reinforcer and
condition excessive use beyond that which is
Until recently, controls were based on a
simple binary decision about whether the drug
would serve as a reinforcer. More recently,
behavioral experiments have shown that drugs
can differ in efficacy as a reinforcer; for
example, studies using progressive ratios (PR)
have been used to rank order drugs by the size of
the highest fixed ratio that will sustain respond-
ing, the so-called break-point assay. While
superficially similar to a demand curve analysis,
this assay does not assess the shape of the entire
demand function but rather uses only the size of
the very last ratio completed as the basis for the
metric. Using the break-point procedure, one
reinforcer is deemed more effective than
another if it yields higher PR break-points
(Griffiths, Bradford, & Brady, 1979; Katz,
1990; Stafford, LeSage, & Glowa, 1998). This
method can be informative, but unfortunately,
limitations have been noted over the years. For
example, the break point is sensitive to paramet-
ric conditions (i.e., the specific FR sequence
imposed), and more importantly for drug
reinforcer scaling purposes, is often dose-
dependent even when tested under the same
FR sequence. Nevertheless, the break-point
analysis has been beneficial in showing that
abuse liability should not be a binary evaluation.
Drugs can vary widely in reinforcer efficacy and
from a policy perspective, if a drug is mildly
reinforcing but will be available in the context of
other far more efficacious and substitutable
 EMPIRICAL PUBLIC POLICY 107

reinforcers, then the true abuse liability could zation with the drug and then later after a 2-
be very small when evaluated within the broader week long history of infusions (Christensen,
economic context of the actual marketplace. Silberberg, Hursh, Roma, & Riley, 2008). In
Based on the exponential demand curve parallel, demand curves for food were also
approach, drugs may be scaled in a dose inde- obtained. Figure 8 illustrates the effect of the
pendent manner according to the a of their extended history for cocaine. There was both an
respective demand curves; drugs with high increase in the level of demand and a change in
sensitivity to price (relatively large a) are less elasticity of demand for cocaine following the
likely to sustain behavior in the context of other extended history. Here, we focus on the change
reinforcers. This has important public policy in elasticity of demand; the demand curve for
implications. For example, many potent analge- cocaine has been plotted as changes in con-
sics that bind to one or more opiate receptors sumption, with Q0 set as the 100% level of
also serve as reinforcers. Recent advances in consumption at the lowest price (see Hursh &
pharmacology have created analgesics that can Winger, 1995). This figure shows that the
relieve pain with less affinity for the receptors additional history with cocaine reinforcement
mediating euphoric/reinforcing effects (e.g., led to a 50% reduction in sensitivity to price (a)
Negus, Schrode, & Stevenson, 2008; see also and an increase in essential value with Pmax
Staahl, Olesen, Andresen, Arendt-Nielsen, & increasing from 19 to 37 responses per unit
Drewes, 2009). Nevertheless, mild positive reinforcement (dashed lines). Hence, the
reinforcement can still be demonstrated under fundamental nature of addiction may be
laboratory conditions. Scaling these drugs defined as a shift in the essential value of a
according to essential value relative to other commodity resulting from some threshold level
drugs as well as reinforcers that are not of experience with the effects of the reinforcer.
controlled substances could serve as a basis for The implications for evidence-based policy are
a more precise quantitative assessment of abuse intriguing: If addiction can be defined in a
risk. Such an approach could open the door for
more rational and proportional drug control
policies that would reduce costs and limitations
associated with the prescription of analgesics.
There are a number of economic theories
available to explain the development of an
addiction as defined as an increasingly strong
tendency to seek and consume a specific
commodity (e.g., Foxall & Sigurdsson, 2011).
Here, the application of the demand law offers a
systematic and longitudinal way to describe the
neurobehavioral changes that are described as
addiction. Rather than attempt to construct a
hypothetical process to explain the develop-
ment of an addiction, we merely provide a
convenient way to measure and track the
process. The underlying processes that predis-
pose individuals to addiction and sustain it once
established most certainly involve the dynamic
interplay between biological, psychosocial, and
broad environmental factors, but there is no
consensus on the exact nature of the process.
Nevertheless, there is a growing literature that
indicates that for some commodities, extended
exposure to the reinforcing properties of the Fig. 8. For the mean of a group of rodents, consumption
item lead to progressive changes in demand of cocaine infusions as a function of increasing fixed ratio
schedule before (open circles) and after an extended history
(Ahmed & Koob, 1998). In a recent experiment of exposure to cocaine (filled triangles), in loglog
with rodents, demand curves for infusions of coordinates. The shift in Pmax is shown as the two vertical
cocaine were determined after a brief familiari- dashed lines (data from Christensen et al., 2008).
108 STEVEN R. HURSH and PETER G. ROMA
standardized manner using a-based metrics
across contexts (animal laboratory, human
laboratory, human clinical, human market-
place) as a significant increase in the essential
value of a commodity and a decrease in elasticity
of demand, then, perhaps, successful treatment
for addiction can be defined and tracked as the
reversal of that processa reduction in essential
value and an increase in elasticity of demand.
Therapy and Demand Interactions
In addition to the conceptual and procedural
strengths of the demand curve approach for
predicting and quantifying drug abuse, the
concepts of substitution and complementarity
provide some insights into important limitations
of individual therapy programs for the control
or elimination of behaviors in excess in
individual clients. Within a behavioral frame-
work, one can conceptualize the therapeutic
situation as one in which the clinician attempts
to shape new behavior under the control of
acceptable reinforcers that compete with and
reduce the occurrence of behavior to obtain
unhealthy commodities, be it illicit drugs,
alcohol, cigarettes, or excessive amounts of
food. Thus, the reinforcers arranged by the
therapeutic process interact with the problem
commodity of therapeutic interest (see Carroll,
1993; Thompson, Koerner, & Grabowski, 1984).
For example, when monkeys were allowed to
work for a sweet saccharin solution concurrently
with consumption of PCP, elasticity of demand
for PCP increased and Pmax moved to the left;
however, considerable amounts of PCP were still
consumed despite the presence of a competing
reinforcer (Carroll, 1993). The effectiveness of
the competition between a drug reinforcer, for
example, and other reinforcers will depend, at
least in part, on several economic factors: the
amount of direct substitution between the
two sources of reinforcement, the availability
of desirable complements to the therapeutic
reinforcers that will maximize their effective-
ness, and the amount of direct competition that
exists between the two sources of reinforcement,
whether performance for one precludes or
prevents reinforcement from the other. These
factors can be illustrated by considering the
effectiveness of methadone therapy for users of
heroin.
Agonist therapy. Methadone is an imperfect
substitute for heroin; it is an opiate agonist and
has many of the psychoactive properties of
heroin and morphine. It is explicitly formulated
so that an oral dose will prevent opiate
withdrawal but will not produce a pronounced
euphoria or high. It substitutes for heroin to
prevent withdrawal symptoms, the aversive
consequences of nondrug use, but does not
substitute for the immediate positive reinforcing
consequences of euphoria. One could predict,
then, that even if a large price differential
existed between the two commodities, some
heroin would still be purchased from illicit
sources for its unique reinforcing features (see
Stitzer, Grabowski, & Henningfield, 1984). In
addition, heroin is often consumed as part of a
social ritual and these social events serve as
complements to the primary reinforcing effects
of the drug. To the extent that the substitute,
methadone, must be consumed in a clinical,
nonsocial environment, its value will be dimin-
ished as an adequate substitute for heroin
because it is not accompanied by important
complementary social reinforcers (see Hunt,
Lipton, Goldsmith, & Strug, 1984).
Antagonist therapy. The use of methadone as
a treatment for heroin is an example of the use
of an agonist to substitute for the drug of abuse
and drive up elasticity of demand. An alternative
approach is to provide a drug therapy that is a
specific antagonist for the drug of abuse; the
antagonist binds to the neurochemical receptor
and blocks or reverses the action of the drug
without itself producing a psychoactive effect.
Although the biological mechanisms differ, a
functionally similar effect would be expected
from various antidrug vaccines currently in
development (Shen, Orson, & Kosten, 2012).
A common antagonist for opiate drugs is
naltrexone or naloxone; it is used in emergency
rooms to rapidly block the action of opiates
in patients that have taken an overdose. As a
therapy, the antagonist partially or completely
blocks the action of the target drug and
presumably would reduce demand. This pre-
sumption has been tested in a study reported by
Harrigan and Downs (1978). Monkeys worked
for morphine under a series of increasing unit
prices for morphine, arranged by decreasing the
morphine dose per reinforcer. Morphine self-
administration was studied either alone or when
combined with one of three doses of intrave-
nous naltrexone. This yielded four separate
consumption curves. Generally, the level of
consumption of morphine at the lowest unit
 EMPIRICAL PUBLIC POLICY
price increased in direct relation to the dose of
naltrexone and sensitivity to the effects of
increasing the unit price also increased with
the dose of naltrexone. This apparently compli-
cated effect of naltrexone can be resolved by
examining exponential demand for morphine
alone and in combination with naltrexone.
Fitting exponential demand revealed that sensi-
tivity to price (a) was unchanged but rather,
there was an upward shift in Q0 such that the
demand curves with naltrexone were uniformly
shifted to the right to higher effective prices
considering the larger baseline levels of con-
sumption required to reach satiation. To state it
another way, naltrexone did not change the
essential value of morphine but did lower the
potency of each morphine infusion and raised
the effective price of the drug.
At first, one might conclude that this indicates
that antagonist therapy has no utility for the
treatment of opiate drug seeking since it does
not alter sensitivity to environmental price
variables. In fact, this is not precisely true. The
effect of naltrexone was to reduce the functional
potency of the morphine. This had the effect of
increasing the functional cost of morphine under
each environmental cost, that is, the unit dose
of morphine. Hence, increases in naltrexone
moved the demand curve to the right and to
lower daily levels of consumption. A sufficiently
high dose of naltrexone would virtually elimi-
nate any reinforcing value of morphine and,
consequently, would move the functional price
sufficiently far to the right that all consumption
would cease under all levels of environmental
cost. In effect, the morphine would be rendered
ineffective as a reinforcer and the costbenefit
ratio for expending any effort to obtain it would
approach infinity. This would occur, not be-
cause the fundamental demand for morphine
was changed, but because the functional poten-
cy of morphine as a reinforcer was changed.
The clinical value of antagonist therapy is
complicated by several considerations. As indi-
cated above, the initial effect of an antagonist
when the environmental price is low and the
dose of the antagonist is insufficient to eliminate
drug reinforcement is an increase in the total
number of injections per day (increase in Q0).
This increase is motivated by the need to
compensate for the functional decrease in the
potency of the drug of abuse that brings with it
several undesirable side effects. First, the
number of doses of the drug required per day
109
increases, and this potentially increases the
need for funds to obtain the drug and to engage
in illegal activities to raise the funds. Second, it
increases the revenues to the drug suppliers.
Third, for self-injected drugs, it may increase the
use of contaminated needles and thus increase
the risk of contracting and spreading diseases
such as hepatitis C and HIV. But the primary
challenge for any antagonist therapy is that it
requires that the subject voluntarily administer a
drug that will drive up the functional cost of
another reinforcer. Ordinarily, consumers
choose to minimize cost, so such a choice would
have to be compensated by a correlated increase
in benefit from other sources of reinforcement,
such as the retention of a well-paying job by a
physician addicted to opiates. For many drug
users, however, such alternatives may not be
available unless provided by the therapeutic
process itself.
Hypothetical Demand Curves for
Policy Analysis
In the prior sections we discussed the factors
that serve to control the choices of a person to
work for and consume drugs of various sorts.
Many other policy decisions relate to similar
choices for other commodities. For example, in
the arena of environmental and energy policy,
tax incentives and rebates are often provided to
encourage citizens to purchase more fuel-
efficient cars, to increase the insulating proper-
ties of homes, or to adopt alternative energy
sources for home electricity. The power of such
policies depends on the price sensitivity of the
commodities at issue. When attempting to
encourage alternative energy choices, high
price sensitivity is a virtue because it suggests
that small reductions in price (using rebates, for
example) will have relatively large effects on
consumption. When attempting to discourage
wasteful use of resources, such as taxes on the
use of paper bags, high price sensitivity is again a
virtue because a small cost, such as 5 cents per
bag, might be expected to have a relatively
powerful effect on consumption. When attempt-
ing to reduce drug use, provision of medically
administered alternatives like methadone are
expected to increase price sensitivity of demand
for substitutable illicit alternatives, resulting in
an overall decrease in consumption of the illicit
commodity in favor of the lower cost (and legal)
medical alternative.
110 STEVEN R. HURSH and PETER G. ROMA
When formulating such policies, it is impor-
tant to understand the demand elasticities of the
commodities at issue; in effect, it is important to
be able to establish the value of a for the various
alternatives. This requirement presents a chal-
lenge because often there are no naturalistic
data available to allow for the mapping of the
basic demand curve. When naturalistic data are
available based on market fluctuations or differ-
ences in supply (and price) across different
geographic locations, the range of prices is often
very limited. This makes it difficult to precisely
map the demand curve and determine the
value of a. Along with other economics-oriented
approaches (e.g., Roddy, Steinmiller, &
Greenwald, 2011), recent experiments have
been conducted using hypothetical demand
curves constructed by asking subjects to indicate
the levels of consumption that they would adopt
if confronted with different prices for the
commodity in question. These experiments
have shown that such hypothetical demand
curves (1) have a consistent shape well de-
scribed by the exponential demand equation
and (2) have values of a that vary with
hypothetical contextual variables.
For example, Murphy and MacKillop (2006)
surveyed alcohol consumption as a function of
price in 267 undergraduate students. Figure 9 is
the resulting demand curve (left panel) and
response output function (right panel). The
Fig. 9. The reported consumption of standard alcoholic drinks as a function of the cost of each drink from a group of 267
college undergraduates responding to a set of questions about hypothetical alcohol consumption (from Murphy and
MacKillop, 2006).
line through the hypothetical consumption
curve is the best fitting exponential demand
curve, and accounted for 99% of the variance in
consumption. The expenditure function also
was well described by the function, and the point
of maximum consumption (Pmax) coincided
closely with the maximum of the exponentially
derived output function. While we have no
independent way to assess the true levels of
consumption of alcohol in these students, the
systematic relationship obtained using the
hypothetical method is encouraging.
One way to assess the usefulness of such
functions is to determine if they vary in a rational
way with other ecologically valid variables. To
that end, Murphy and MacKillop (2006) related
the demand curves in these students to their
reported overall use of alcohol. They divided the
267 students into two groups defined as light
and heavy alcohol users. The two resulting
demand curves (Figure 10) differed from each
other in both Q0 and a. Heavy drinkers had
higher levels of consumption, as might be
expected from their self-assessment of overall
use, but they also showed less sensitivity to
alcohol price, with an a value about half that of
light drinkers. In a similar study, MacKillop et al.
(2008) reported that minimal users of nicotine
products had price sensitivity (a) that was 5
times higher than that reported by those with
moderate nicotine use.
 EMPIRICAL PUBLIC POLICY 111

Fig. 10. The reported consumption of standard alcoholic drinks as a function of the price of each drink from two groups
of college undergraduates, one group self-reporting as light drinkers (n 78) and the other group self-reporting as heavy
drinkers (n 189). Subjects responded to a set of questions about hypothetical alcohol consumption (from Murphy and
MacKillop, 2006).

These findings suggest that hypothetical
demand curves may be used as a tool to inform
public policy that will use taxes to increase prices
to discourage certain behaviors, or use incen-
tives and rebates to encourage other behaviors
(e.g., MacKillop et al., 2012). Such research will
provide two important pieces of information.
First, it will help define the overall shape of the
underlying demand curves and the associated a
values. Second, it will help define where the
current prevailing price is relative to Pmax, that is,
is demand elasticity in the vicinity of the current
price elastic or inelastic? This will lead to directly
verifiable predictions of the policys (price
increase or decrease) effect size on resulting
consumption.
Consistent with a behavioral economic ap-
proach, some policy initiatives impose nonmon-
etary costs. For example, consider a policy that
would encourage the use of an alternative
ethanol-based fuel for automobiles. Even if the
price of the fuel were equivalent to the price of
regular gasoline, other costs might have a
dramatic impact on utilization, such as the
travel time and distance to the alternative fuel
station, the potential to travel to a location that
does not have such fuel, and a possible
reduction in fuel mileage necessitating in-
creased frequency of refueling. If the vehicle
would run on both kinds of fuel (i.e., if the two
fuels were functionally substitutable), the much
higher convenience of using the standard fuel
might outweigh any environmental benefit. To
combat this disincentive, the policy maker may
have to provide counteracting incentives to the
consumer, such as refueling rebates and tax
incentives. In addition, the policy maker may
need to take steps to reduce the disincentives,
such as encouraging producers to increase
availability of the alternative fuel. But the
question ultimately becomes one of how much
compensation is required to have a beneficial
impact on alternative fuel use. The use of
hypothetical demand curves provides a meth-
odology for evaluating the impact of these
incentives on expected consumption, providing
an empirical basis for a rational costbenefit
analysis of the proposed policy.
Novel Applications and Recent Developments
Time Cost and Transportation Mode Choice
In the previous section we introduced the
idea that time costs can be just as important as
monetary costs. Interestingly, this notion was
explored experimentally with rodents by
Bauman (1991). Here, a group of rats obtained
their daily ration of food according to an FR
schedule. Across days the value of the FR was
increased (27 FRs from 1-446 per pellet) and
demand curves for food were determined in the
traditional way, similar to that shown in Figure 2.
In the next phase of the experiment, the same
112 STEVEN R. HURSH and PETER G. ROMA
Fig. 11. The number of food pellets earned by a single rat
each day as a function of the time from the first response to
the reinforcer, either under a fixed-ratio requirement
(Ratio) or under a response initiated fixed-interval (Delay;
from Bauman, 1991).
subjects obtained their daily ration of food by
completing response-initiated FI schedules, the
durations of which were set to match the time
taken to complete each of the FR schedules by
that subject. Across days, the value of the FI was
increased and demand curves were created as a
function of the duration of the FI. When the
results were subsequently analyzed, the demand
curves for consumption based on time, ar-
ranged either by FRs or matched FIs, were
nearly equivalent and had shapes similar to
that expected of exponential demand (see
Figure 11). Of course, equivalent curves based
on responses, rather than time, under the two
conditions were not at all equivalent. Taken
together, these data underscore the critical
importance of time cost per se as a fundamental
independent variable that can explain decreases
in consumption with increases in price.
Time cost has fundamental importance for
many public policy decisions, and behavioral
economic analyses along this dimension can
yield important insight on some of societys most
pressing issues. Consider Americas aging infra-
structure6 and initiatives to promote expanded
high-speed rail service in the United States
(trains operating at 150220 mph [240
350 km/h]7). Rail transportation mitigates traf-
6
http://knowledge.wharton.upenn.edu/article.cfm?ar-
ticleid2627 and http://www.nytimes.com/2010/02/16/
opinion/16herbert.html
7
US Federal Railroad Administration: http://www.fra.
dot.gov/rpd/passenger/31.shtml
fic congestion and deterioration of highways,
facilitates access to cities business, cultural, and
recreational centers, and creates a lower carbon
impact than automobile or aviation alternatives.
However, passenger rail service in the US does
not command a large market share in most
travel corridors, and a major contributor may be
a simple matter of time cost.
In Europe, where high speed rail has been
very successful, studies have been conducted
that relate journey time to rail market share
(Esplugas, Teixeira, Lpez-Pita, & Saa, 2005;
Sinclair Knight Merz, 2010). The resulting time-
cost demand curve for rail market share
presented in Figure 12 is remarkably similar to
the time-cost demand curve for rodents working
for food, but with a longer time horizon, of
course (Sinclair Knight Merz, 2010). Using this
type of analysis, let us consider the 342 mi
(550 km) travel corridor in the western United
States between San Francisco and Los Angeles,
California. A passenger train that travels an
average of 60 mph (100 km/h) would have a
journey time of 5.7 hrs (342 min), placing it at
an estimated market share based on Figure 12 of
about 10%. If the average speed were increased
to 140 mph (225 km/h), the journey would
take 2.4 hrs (144 min) and may increase market
share to above 70%. Hence, a 133% increase in
speed could result in a 700% increase in market
share.
In the spirit of empirical public policy, the sort
of information exemplified above can then be
directly applied to estimate ultimate ridership,
potential revenue, and the monetary return on
investment for building the infrastructure to
support the system. Furthermore, since rail
travel creates a carbon load per passenger mile
that is about half that of alternative automobile
or aircraft travel, this investment could yield a
commensurate environmental benefit. While all
of this is somewhat hypothetical, the reasoning
illustrates how a basic economic model of time
cost as a factor in consumer choice can be
translated into an empirical foundation for
policy decisions, business investment, and ulti-
mately, environmental impact and quality of life
(Magoon & Hursh, 2011). The tools for such
analysis have already been developed for
evaluation of hypothetical demand for several
commodities and need only be translated into
other commodities and costs to be relevant to
virtually any public policy that relies on a change
in consumer choice.
 EMPIRICAL PUBLIC POLICY
Fig. 12. The percent share of the European transportation market allocated to rail as a function of the rail journey time
(min). Different symbols denote different reporting periods and the data are approximated by a logit curve (adapted from
Sinclair Knight Merz, 2010).
Behavior Analysis of Cooperation,
Productivity, and Fairness
Despite the shared interest in quantifiable
behavior between economists and psychologists,
the philosophy and methods of behavior analy-
sis have not been enthusiastically embraced by
economists beyond acknowledging the rele-
vance of some seminal work (e.g., Herrnstein,
1961) predating Hurshs more formal introduc-
tion and expansion of Behavioral Economics in
Psychology (Hursh, 1978; 1980; 1984). However,
the subfield of economics known as Experi-
mental Economics (Kagel and Roth, 1995)
represents an area of methodological overlap
that could be enriched by the behavior analytic
approach described throughout this review, in
effect feeding behavioral psychologys econom-
ics-based innovations back into the parent field
which inspired them. Experimental economics
generally focuses on controlled laboratory
studies targeting the fundamental behavioral
and social decision-making processes underly-
ing bargaining and resource allocation, and is
the primary field associated with standardized
economic games such as the Ultimatum Game,
Prisoners Dilemma, and Public Goods task
(e.g., Amir, Rand, & Gal, 2012). It is within this
context that an emerging behavioral-economic
technology within Psychology could provide
empirical insight to economists and others
with a vested interested in social policy.
113
The price of cooperation. We have been
developing and testing a simple, rapid, objec-
tive, and language-free computer-based task as a
standardized assay of cooperative propensity,
productivity, and fairness in small groups. This
tool, known by the current prototype softwares
generic working title Price of Cooperation
(PoC), applies behavioral economic demand
curve principles, with voluntary cooperative
behavior as the primary commodity that in-
creases in price over the course of the session.
We recently published details of our preliminary
development efforts for a team performance
task (Emurian et al., 2011) and several forth-
coming papers are now in preparation describ-
ing the PoCs parameters and early validation
efforts, including its sensitivity to contextual
variables such as budget (i.e., increased
cooperation with increased session length)
and social distance (i.e., ability to objectively
discriminate between groups composed of
friends vs. groups composed of strangers).
Through support from the U.S. space program,
our work thus far has focused primarily on
construct validity and how trait-like PoC pro-
files may predict and track variations in
interdependent task performance and social
cohesion in long-term work groups. However,
the PoC yields several sensitive individual and
group-level metrics that in and of themselves
make the assay a potentially face-valid model
of cooperation, productivity, and fairness in
114 STEVEN R. HURSH and PETER G. ROMA
response to external conditions akin to public
policy and various societal structures. Thus, as
described below, in addition to its potential
value as a research tool, such work may also yield
insight on basic social-behavioral processes
while providing a scalable conceptual and
methodological framework of relevance at the
policy level.
To briefly summarize the PoC task itself, the
current prototype software was designed for
three-person groups with all members partici-
pating simultaneously through networked PC
computers. All behaviors are mutually exclusive
as controlled through the computer mouses
left-click button. During a session, each partici-
pant earns points (which may be assigned a fixed
monetary value) by using the computer mouse
to click and drag blocks from a Resource zone
at the top of the screen into the Target zone at
the bottom of the screen without striking any
barriers in the process. Barriers are randomly
dispersed throughout the field for random
amounts of time before resetting and changing
positions. Each barrier strike deducts a point
from the offending group members score and
immediately releases the offending resource
block from his/her control. Each group mem-
ber owns an equal number of barriers that only
s/he can see but will still result in lost points if
struck by a resource block. If an individual
wishes to help the rest of the group by revealing
a barrier to the rest of the team, s/he must click
and hold that barrier with the mouse for a fixed
amount of time. Individuals do not know who
owns which barriers, and thus all barrier reveals
are anonymous. Since all behaviors are mutually
exclusive, revealing barriers facilitates the rest of
the groups point-scoring efforts but precludes
ones own accumulation of points during that
barrier-reveal time. The time requirement per
barrier-revealthat is, the price of cooperation
increases from 0.25 sec during the first one
third of the session to 1.0 sec during the middle
one third of the session to 4.0 sec during the
final one third of the session. Real-time displays
present each participant with the current
barrier-reveal requirement, notification of bar-
rier hits, and updated point totals (individual
and group). All behavior is completely volun-
tary, and no particular behaviors are required
from any one individual to participate in a
session.
At its heart, the PoC is an operant choice
procedure in which the subject must continu-
ously choose between passivity, allocating effort
toward individual point accumulation, or
allocating effort toward facilitating the point
accumulation efforts of others in the group.
Conceptually, the design draws from evolution-
ary theory under the auspices of prosociality,
namely altrusim (helping others at cost to
oneself), or more specifically, a form of
reciprocal altruism (Trivers, 1971) known as
parochial altruism, defined as helping a
member of ones own group at cost to oneself,
with or without aggression to members of
other groups (Choi & Bowles, 2007; De Dreu
et al., 2010; also see Locey, Safin, & Rachlin,
2013, and Rachlin & Locey, 2011 for a behavior-
analytic perspective on altruism). This line of
research is entirely new and therefore not nearly
as developed as the body of basic and transla-
tional behavioral pharmacology work enriched
by the behavioral economic perspective de-
scribed herein. However, the example data
below highlight some of the PoCs key features,
and based on this conceptual and analytical
approach, we offer some speculative but en-
couraging policy-relevant extensions.
These data come from a mixed-gender group
of 3 college-educated adults who share an
extended history working together on various
team tasks in our laboratory. This group was part
of an experiment of five groups (N 15; Roma,
Hursh, Hienz, Brinson, & Brady, 2012), and was
chosen for this illustrative presentation because
the qualitative and inferential statistical patterns
of effects described below are identical to those
of the larger subject pool. The analyses are
based on individual average barrier reveal and
point-scoring behaviors over three consecutive
6-minute PoC sessions per condition. The
conditions were Fixed Income where each partici-
pant received a flat fee of $20 USD/hr regard-
less of performance, Collective Incentive where the
groups collective point total was multiplied by
10 US cents and the earnings were divided
evenly amongst all group members, and Individ-
ual Incentive where each individual group
member collected their respective point total
multiplied by 10 US cents regardless of the other
group members behaviors.
As seen in Figure 13, the sensitivity of the
demand curve approach to simple policy
changes is apparent: Although baseline cooper-
ation (Q0) did not vary by price or condition,
the group was significantly less willing to
sustain their cooperative efforts (1/a) under
 EMPIRICAL PUBLIC POLICY
Fig. 13. Summary of overall mean cooperation by
incentive condition as a function of the price of cooperation.
Although maximum/baseline cooperation (Q0) did not vary
by condition, the group was significantly less persistent in
their cooperative efforts (1/a) under the Individual
Incentive condition versus both other conditions
(*p < .05, **p < .01; Exponential Model parameter values
compared via Sum-of-Squares F Test).
the Individual Incentive versus both other
conditions.
For a closer look in the behavior-analytic
tradition, Figure 14 presents cooperative effort
(top row) and productivity (bottom row) data
for each individual group member (S1, S2, S3)
in each condition (columns). Although both
behaviors tended to decrease in all group
members as the price of cooperation increased,
it is interesting to note that in the conditions
where all participants received equal pay, S1 was
the least cooperative and S3 was the most
cooperative with a correspondingly opposite
relationship in productivitya de facto division
of labor where S1 could claim credit as the most
productive member of the microsociety
(Brady, Bernstein, Foltin, & Nellis, 1988; Emur-
ian et al., 2009). However, when individual
earnings were based solely on individual points,
S3 reduced cooperation at the highest price
thus maintaining relative homogeneity in
productivity.
Units of analysis. The consistent functional
outcomes of dynamic behavioral interactions
within a group such as those described above
can arguably define that group as a singular
115
entity, but informative metrics beyond group
means and sums are not abundant (see Wild-
man, Bedwell, Salas, & Smith-Jentsch, 2010 for
a thoughtful review of this issue in applied
settings). To this end, the following section
explores some genuine group-level metrics that
may be used to characterize a social system
within the PoC. Specifically, we first explored
the Gini coefficient (Gini, 1912), which is a
measure of distribution inequality based on the
shape of the empirical cumulative distribution
curve versus the cumulative distribution curve of
perfect equality. This metric ranges from 0,
where all members have an equal amount, to 1,
where a single member has everything, and is
widely used in macroeconomics, sociology, and
anthropology to quantify income inequality
between nations or between municipalities
within a nation (De Maio, 2007). However, by
relying on the shape of the empirical cumulative
distribution of a resource relative to a perfectly
equal distribution, it may be applied to any
situation where a finite amount of a commodity
is divided amongst a finite number of entities.
This makes it appropriate for analyzing the
distributions of cooperation, productivity, or
any other behavior within the PoC paradigm.8
Figure 15 shows that inequality in cooperative
effort and income generally increase as the price
of cooperation increases, thus reflecting the
spread of individual values at the highest price
depicted in all panels of Figure 14. However,
from an economics and policy perspective, it is
interesting that income distribution is appar-
ently most equitable in the Individual Incentive
condition despite the rising price of coopera-
tion. Clearly the Gini coefficient provides a
sensitive group-level metric, but is income
inequality a sufficient measure of group
function?
The PoC task differs from other economic
games in several fundamental ways; cardinal
among them is the fact that all individual
productivity starts at zero and is earned via
successful block deposits rather than negotiated
down or otherwise divided from a zero-sum
endowment provided by a benevolent benefac-
tor. Moreover, the PoCs inclusion of metrics for
both individual productivity and cooperative
8
For details and tools for calculating the Gini coefficient,
see http://people.hofstra.edu/geotrans/eng/ch4en/
meth4en/ch4m1en.html and http://www.wessa.net/co.
wasp
116 STEVEN R. HURSH and PETER G. ROMA

Fig. 14. Cooperative effort (top row) and productivity (bottom row) data for each individual group member (S1, S2, S3)
in each condition (columns) as a function of the price of cooperation.

effort provides a novel yet direct means of
quantifying fairness. Whether macroeconomi-
cally from a global policy perspective or
behavioral-economically in the laboratory, a
practical limitation of the Gini Coefficient as a
measure of group fairness based solely on
income inequality is accounting for what people
give to society relative to what they take from it,
even if they do not take directly from one
another. The PoCs combination of earned
individual productivity and contribution to the
common good within a quasi-operant paradigm
differentiates it from all other economic games
of which we are aware, and a fortunate con-
sequence of this constellation of features is a
derivative measure we call the Fair Share Index
(FSI). Simply put, the FSI is ones percentage of
the groups total cooperative effort (barrier
 EMPIRICAL PUBLIC POLICY
Fig. 15. Group-level inequality of cooperative effort and
individual productivity (Gini Coefficient) in each incentive
condition as a function of the price of cooperation.
reveals) minus ones percentage of the groups
total productivity (points). A positive FSI
indicates that ones cooperative contributions
were disproportionately larger than ones indi-
vidual productivity (cooperative bias terminat-
ing at 100 for contributing 100% of the barrier
reveals while earning zero points); a negative
FSI indicates that ones individual productivity
was disproportionately larger than ones coop-
erative contributions (selfish bias terminating at
100 for earning 100% of the points while
contributing zero barrier reveals); and an FSI of
117
zero indicates perfect fairness, in that ones
cooperative contributions exactly matched
ones individual productivity regardless of any-
ones absolute levels of barrier reveals and
points scored.
The top row of Figure 16 displays individual
FSIs for each of the conditions as a function of
the price of cooperation. As with the other
measures, the demand curve approach produ-
ces the most interesting data when cooperative
propensity is challenged at the highest price,
with the division of labor in the conditions with a
priori equal payouts still apparent, featuring S1
dominating the point-scoring, S3 dominating
the cooperative facilitation, and S2 contributing
equally to both. However, in the Individual
condition, we see how S1 continues to operate
selfishly but at a somewhat reduced rate as S2
and S3 focus their efforts on generating fairer
outcomes for themselves. For a group-level
metric incorporating fairness data, we calculat-
ed the sum of squared individual FSIs, divided
the product by 20,000 (i.e., the maximum
possible amount), then multiplied that by 100.
The resulting group unfairness index scales
unfairness from 0 to 100, with 0 indicating a
perfectly fair group in which what each member
gave was exactly proportionate to what s/he
took, and 100 indicating a perfectly unfair group
where one individual took everything but gave
nothing (free-rider) at the expense of another
individual who took nothing but gave everything
(sucker) while all other group members
remained completely inactive (bystander
(s)). In effect, this metric quantifies the extent
to which one could gain by exploiting others in
the group, or conversely, the risk of being
exploited or otherwise unproductive as a
member of the group.
Like the Gini Coefficient, the group unfair-
ness index provides a genuine group-level
metric, but a more comprehensive one since it
incorporates both cooperative effort and earned
productivity. Nonetheless, the calculation that
defines the group unfairness index, or really any
measure of variability or skew, cannot identify
the underlying source(s) of variability, but when
considered with the individual FSI data from
which it was derived, a more thorough under-
standing of group function emerges. In our
example data, the group unfairness index
presented in the bottom panel of Figure 16
reveals the group as one that is generally fair
even at its worst, but still with the potential risk of
118 STEVEN R. HURSH and PETER G. ROMA
Fig. 16. Individual-level Fair Share Index (FSI) and group-level unfairness index in each incentive condition as a function
of the price of cooperation.
fragmentation at the hands of a single free-rider
as the price of cooperation increases.
Policy implications. The systematic applica-
tion of behavioral economic demand curve
methods and analyses to social behavior is new,
so the ability of the PoC assay to inform public
policy is indeed an empirical matter that
remains to be seen. However, one recent
example of how multiperson resource alloca-
tion tasks can generate policy-relevant insight
comes from Sambanis, Schulhofer-Wohl, and
Shayos (2012) review of parochialism, specifi-
cally in the very serious context of international
counterinsurgency operations. They note how
several variables consistently shown to precipi-
tate parochialism in laboratory settings, if not
managed properly in the field, can reinforce
local citizens perception of government and
counterinsurgency forces as an out-group,
thereby increasing both cooperation with native
insurgents and aggression against those whose
ultimate goal is self-sustained safety and stability
for the general population. In effect, invoking
those evolutionarily conserved psychosocial
mechanisms increases the essential value of in-
group membership (cf. Klor & Shayo, 2010)
despite the often tragically high price of
cooperation for all involved. Of course, stan-
dardized behavioral tasks are no more practical
or appropriate for field deployment in high-risk
operations than hypothetical demand curves
are for administration to drug abusers during
interactions with their dealers, but what this
work does is illustrate how prospective experi-
mental research can produce knowledge on
basic social-behavioral processes while poten-
tially offering an empirical foundation for
estimating the effects and risks of relevant
 EMPIRICAL PUBLIC POLICY
historical, cultural, and legal variables when
formulating sociopolitical policy.
On the other end of the social behavior
spectrum, cooperation in relatively stable indus-
trialized societies often takes the form of
voluntary donations, and considerable strategic
effort is expended by government agencies and
charitable organizations to facilitate this pro-
cess. Not surprisingly, the frequency and
quantity of monetary donations are strongly
associated with income at the individual,
organizational, and national levels (Giving
USA, 2012; Charities Aid Foundation, 2011),
and certainly policy initiatives such as tax
incentives are intended to further reduce the
price of cooperation for charitable financial
giving9. However, money itself is not always the
price of cooperation nor is it always the
commodity consumed by the recipient. Indeed,
consistent with the behavioral-economic ap-
proach advanced throughout this report, time
itself is a core commodity of tremendous value,
especially given the fact that income is non-
accumulating and no ones daily budget can
possibly exceed 24 hours regardless of financial
wealth.
To illustrate the broader relevance to social
policy of the PoCs conceptual foundation and
quantitative behavioral-economic approach
from which it draws, we analyzed the most
recent data published in 2011 from 32 of the 34
highly developed member countries of the
Organisation for Economic Co-operation and
Development (OECD). Specifically, based on
initial processing of data from the Gallup World
Poll10 by the Charities Aid Foundation (2011),
we examined two national-level prosocial behav-
ior variables: (1) percentage of the population
that helped a stranger or someone they did not
know within the last month and (2) percentage
of the population that volunteered their time to
an organization within the last month. The
predictor variable against which those outcomes
were plotted was based on the OECDs summary
of Gallup World Poll data regarding 2011 work
hours among those nations employed citi-
zens11. Specifically, we took the average annual
hours actually worked per worker for each
9
http://www.economist.com/node/21556570
10
https://worldview.gallup.com. Original survey data
from representative samples of Ns 5001000 per country.
11
http://stats.oecd.org/Index.aspx?DataSetCode
ANHRS
119
nation, expressed that as a difference score
relative to the OECD country with the lowest
average work-hours commitment (The Netherlands,
at 1379 hr/yr), then divided the resulting
disparity by 12 as a rough estimate of a nations
relative price of cooperation per month for
the average worker to give free time to help
others. All data were sorted by the work hours
variable and binned into quintiles, the means of
which were then analyzed using the Exponential
Model of Demand.
The results depicted in Figure 17 reveal
several noteworthy features. First is that at all
points, helping strangers is far more prevalent
than donating time to an organization. This
relationship would be expected from a behav-
ioral-economic perspective, as spontaneous acts
of kindness such as giving someone spare
change, offering directions, picking up dropped
items, etc. all bear a very low time cost compared
to the formal process of scheduling and
delivering time to an organization. Indeed, a
sum-of-squares F test confirms that maximum
demand for helping strangers (Q0) is signifi-
cantly higher than that of volunteering time to
an organization (51% vs. 36%; F(1,6) 11.0,
p < .05). These two forms of prosocial behavior
are further dissociated by their relations to
increasing work demands. Given the low and
relatively constant time cost of momentarily
helping strangers, this particular behavior is
insensitive to the price imposed by increasing
commitment to work, as indicated by the
resulting demand curve that is modestly fitting
at best (R2 .66) and yielding an extremely low
a value that does not significantly differ from
zero (sum of squares F(1,3) 5.8, p > .09).
Most importantly, and as expected, the proba-
bility of donating time to an organization
showed a very orderly decreasing relationship
to the price of cooperation, with a well-fitting
demand curve (R2 .93) and a significantly
higher sensitivity to price (a) than that of
momentarily helping a stranger (sum of squares
F(1,6) 33.0, p < .01).
This international analysis of prosocial behav-
ior is empirical by virtue of its integration of
actual data, but is by no means definitive, nor do
we offer it as such. Prevalence rates of any
complex behavioral pattern are most certainly
influenced by a variety of economic, cultural,
and psychological factors; however, if the
relations described here hold true, then the
social policy implications are intriguing. First is
120 STEVEN R. HURSH and PETER G. ROMA

Fig. 17. Prevalence of nonmonetary prosocial behaviors in working citizens of industrialized nations as a function of the
price of cooperation in the form of increasing work hours. All model parameters were tested via sum-of-squares F test (Left
panel: slope differs from 0, **p < .01; Right panel: difference between behaviors, *p < .05, **p < .01).

that all prosocial behaviors are clearly not Discussion

created equal, and so strategies to promote
civility need not appeal to short-term conve-
nience as a motivating factor. More importantly,
while helping strangers and donating time may
both yield long-term benefits to society, the
latters apparent sensitivity to work hours makes
worklife balance a reasonable target for policy
consideration at all levels. For example, if basic
economic needs and productivity goals could
still be met, then decreasing the lowest quintiles
worker hours by as little as 10% (from 52 to 47
hr/month difference score) could potentially
yield a 20% increase in the prevalence of
monthly charitable donations of time. These
data suggest that modest changes in worklife
balance can not only directly benefit workers
and their families as typically intended (Lee,
McCann, & Messenger, 2007), but the behavior-
al-economic strategy of reducing the price of
cooperation for donating time may also pay
residual dividends to others in the community.
The preceding overview described recent
advances in theory, research, and analysis in
Behavioral Economics within Psychology, with a
view toward potential applications of demand
curve principles to public policy development
and evaluation in various domains such as drug
abuse, transportation choice, and social behav-
ior. Although many of the basic concepts have
been tested in operant learning and behavioral
pharmacology settings, the use of economic
demand curves in any form is still fairly limited,
and application of the various quantitative
models is still in its infancy.
In terms of policy implications, focused efforts
to develop behavioral-economic approaches for
formal inclusion in drug abuse risk manage-
ment would require considerable public and
private investment to ensure reliable and valid
techniques and metrics across reinforcers, drug
classes, and species. Despite the broader
 EMPIRICAL PUBLIC POLICY
implications, much of this would naturally fall
under the auspices of basic research. For
example, for any given reinforcer, what is the
best quantity (or dose) for establishing a
demand curve or complementsubstitute test?
Does a hypothetical demand curve lose credi-
bility if the range of prices far exceeds realistic
range? Does a vary based on the particular
prices used or the width of the range of those
prices; and if so, what is the most appropriate
interpretation of such findings? These and
other empirical issues would have to be
systematically addressed to lay the foundation
for behavioral economics as a policy tool
(cf. Loewenstein, Asch, Friedman, Melichar, &
Volpp, 2012), but given the unique conceptual-
ization of reinforcement embodied by the latest
generation of behavioral economic models such
as the Exponential Model of Demand, it would
also likely yield insights on basic neurobiological
and behavioral mechanisms of reinforcement.
Similar issues are also relevant for question-
naire-based assessments in any area, either for
preclinical research and development, clinical/
marketing surveys, field research, or broad
public polling. The most obvious but no less
critical issue is developing questionnaires with
acceptable psychometric properties that pro-
duce data suitable for behavior-economic analy-
ses while remaining relevant to the participants
and informative to those conducting the re-
search. Clearly, the laboratory setup of a lever
and food-hopper or conventional market analy-
sis of financial price and purchasing frequency
must give way to creative hypothetical adapta-
tions that can still reliably quantify motivation.
Fortunately, innovative work in drug abuse has
exemplified the flexibility of the hypothetical
demand curve approach by defining essential
value at the population level as the percent of
subjects making a binary choice to purchase
drugs under various conditions (Greenwald,
2010). Emerging survey development in the
transportation sector has also framed questions
as the probability of individual drivers of flex-
fuel vehicles selecting E-85 fuel as a function of
distance and time from a standard fueling
station12. Further adaptation of these techni-
ques could produce hypothetical demand
curves suitable for cross-price elasticity analyses
12
Roma, P. G., Hursh, S. R., & Magoon, M. (2012, May).
Fuel Purchasing Behavior Survey. [Available upon request to
the Authors].
121
as well, thus quantifying complementsubstitute
relations in a wide variety of contexts.
Despite its deceptively simple nature, the PoC
yields a suite of objective metrics that provide
the means for a rich, multidimensional view of
group function and individual behaviors within
an interactive social setting. The representative
social-behavioral example data presented here-
in are encouraging, and while admittedly
premature, it is not difficult to imagine a fully
researched and developed tool one day inform-
ing decisions as a standardized assay of cooper-
ative propensity for personnel selection and
team composition in diverse organizational
settings, as a simple assessment or training
exercise in educational settings, or as part of a
diagnostic and treatment efficacy-tracking ap-
proach in clinical neuropsychiatric populations
characterized by social deficits (e.g., autism
spectrum, schizophrenia). Techniques such as
hypothetical demand curve questionnaires can
provide empirical insights on a wide range of
policy domains, and behavioral assays built on
behavioral economics and behavior-analysis
principles can provide experimental insight to
test theories and model the effects of policy
variations and social context on broader issues
within and across cultures, including communi-
ty engagement, cooperation, productivity, fair-
ness, and other aspects of good citizenship of
concern to behavioral scientists, social scientists,
and policy-makers alike.
Whether studying basic reinforcement mech-
anisms, drug abuse, consumer choice, social and
economic behavior, or any other topic with
broad societal implications, an emphasis on
empirical policy rooted in behavior analysis
requires predictive validity in the tools used to
inform, develop, and evaluate said policy.
Elasticity of demand and the essential value
of commodities may very well contribute to
individual differences in consumption, and
exquisitely controlled laboratory assays and
carefully crafted questionnaires may very well
produce reliable metrics of the underlying
motivational effects of various commodities,
but ultimately, the variability observed in any
behavioral-economic measure must correspond
to peoples behaviors and choices in the real
world that public policy seeks to shape. Even
with this and other challenges in mind, based on
previous work and recent advances in the field,
we remain optimistic in our belief in the value of
science and evidence as the primary bases for
122 STEVEN R. HURSH and PETER G. ROMA
decision-making at all levels. In this spirit, we
believe that behavioral economics offers great
potential as a broadly applicable and cross-
cutting theoretical, technical, and analytical
framework for research, development, and
evaluation of empirical public policy.
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Received: June 12, 2012
Final Acceptance: October 7, 2012