2008), costs of absenteeism (Cawley et al., 2007) and lifetime health care expenditures (Bhattacharya and Sood, 2011), obesity represents a significant burden for welfare systems.

The experiment conducted to address these questions was administered between spring 2010 and summer 2013 and involved 700 participants of four medical rehabilitation clinics. Two randomly assigned treatment groups were first offered EUR 150 (USD 188 in PPP) or EUR 300 (USD 376 in PPP) for achieving an individually assigned contractual target weight loss between 6 and 8 percent within 4 months.<sup>2</sup> After completion of the weight‐loss phase, participants who had achieved at least 50 percent of the contractual weight loss were randomly assigned to three experimental groups, again two treatment groups and a control group. Individuals assigned to the treatment groups were promised EUR 250 (USD 313 in PPP) or EUR 500 (USD 627 in PPP) for maintaining a body weight below the target weight 10 months after enrollment. Body weight was measured once more at the end of a 12‐month period following the end of the second intervention.

As documented elsewhere (Augurzky et al., 2012), we found strong effects of monetary incentives for weight loss 4 months after the start of the experiment. In this paper, we document that, even though the treatment groups partially regain weight after removal of the incentives, the weight‐loss effects are persistent. This is the first experiment involving monetary rewards that reports lasting effects on body weight.

Promising successful “losers” an additional cash reward to keep the healthier body weight also appears to be an effective strategy, at least in the short‐run. While the control group of the second intervention significantly regained weight, both treatment groups were similarly successful in preventing large weight regains, i.e., the “yo‐yo effect”. In the long‐run, i.e., after 12 months, however, these differences were no longer observable. The results are robust against a series of sensitivity tests. For instance, the estimated effects of monetary incentives on weight loss are robust with respect to non‐random sample attrition. Moreover, results remain unchanged when controlling for variables that describe the condition at the control weigh‐in, capturing possible ways of how participants may influence their measured body weight other than through weight loss. Hence, potential strategic behavior of treated participants to achieve their targets is not able to explain the effects.

The results of our analysis suggest that motivation crowding does not play a dominant role for the effects of monetary incentives on weight loss because we do not observe that they worsen the degree of obesity in the longer term. This would be expected in the presence of remarkable negative effects on intrinsic motivation once the opposing relative price effect of monetary rewards stops due to incentive removal. The finding of sustainable effects instead provides evidence in favor of the habit formation theory, at least that habit formation dominates motivational effects. However, the results concerning the effects of financial incentives to

> 2 We use the purchasing power parities exchange rate of 2011 provided by OECD (2012).

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