<blockquote>
<p>Could you provide examples of business models, where the service provider gets rewarded for things not happening (or at least not deteriorating).</p>
</blockquote>
<p>I think you're asking for examples of businesses that thrive on preventing &quot;bad things&quot; from happening. There should be plenty of those:</p>
<ul>
<li>Security firms prevent financial and physical losses to their clients and get paid handsomely for doing so.</li>
<li>Software companies sell anti-virus programs that prevent computers from being infected by malware.</li>
<li>Sports firms design gears that prevent injuries from happening during sports.</li>
<li>Pharmaceutical companies produce dietary supplements to keep people healthy.</li>
<li>Gyms offer facilities, trainers and courses to keep their members physically fit.</li>
<li>...</li>
</ul>
<p>The list can go on and on and on...</p>

CC BY-SA 4.0
2020-09-02T08:40:03.453Z
This is correct, but it would have been more "genuine" model if the reward was tied to the actual non-happening of a bad event. What I mean is, for instance, the pharmaceutical company getting money if you actually do not get ill as long as you take their dietary supplements and not getting money if you do get ill. This is different from the simple sale of supplements. Same about the antivirus software - the company getting rewarded if your computer remains safe and not getting any reward if your computer suffers an attack.
drabsv
CC BY-SA 4.0
2020-09-02T17:24:54.060Z
@drabsv: "*Same about the antivirus software - the company getting rewarded if your computer remains safe and not getting any reward if your computer suffers an attack.*" I'd argue that even insurance companies don't qualify under this criterion --- they get paid a premium whether or not there is an accident.
Herr K.
CC BY-SA 4.0
2020-09-02T17:37:25.327Z
@drabsv: Also, your question is at a certain level semantic rather than economic. In a situation where someone gets paid when event $E$ happens and does not get paid (or gets paid less) when event $E$ does not happen (i.e. the complement $E^c$ happens), there's a large degree of semantic freedom in deciding what is $E$ and what is $E^c$. Consider the following two cases. **Case 1.** Let $E$ be the event that "*the company makes a profit*". The CEO would get paid a bonus when $E$ happens. (to be cont'd...)
Herr K.
CC BY-SA 4.0
2020-09-02T17:40:35.370Z
(cont'd) **Case 2.** Let $E$ be the event that "*the company does not make a profit*", so that the CEO gets a bonus when $E^c$ happens. Both cases are factually the same, but they differ by semantics: the CEO gets paid in Case 1 for making something (profit) happen; whereas in Case 2, the CEO gets paid by preventing something (loss) from happening.
Herr K.
CC BY-SA 4.0
2020-09-02T18:55:46.993Z
@ Herr K. well, insurance companies do not qualify in that particular example, but since they do lose money when an accident has happened, they are one of the closest examples.
drabsv
CC BY-SA 4.0
2020-09-02T19:49:02.980Z
@ Herr K. "In a situation where someone gets paid when event E happens and does not get paid (or gets paid less) when event E does not happen" - I am talking about the situation when someone gets paid when E does not happen.
drabsv
CC BY-SA 4.0
2020-09-02T19:53:17.947Z
@ Herr K. making profit happen and preventing loss are factually not the same.
drabsv
CC BY-SA 4.0
2020-09-03T03:40:31.393Z
@drabsv: My point is that what event gets called $E$ is semantics and that's largely what determines whether an example satisfies your criterion. Insurance qualifies because you take $E$ to mean *accident*, and $E^c$ *no accident*. But you could very well have taken $E$ to mean *no accident* and $E^c$ to denote *accident*, in which case insurance does not qualify. Likewise, my CEO example works if $E$ means *non-positive profit* (or *non-negative loss*, to address your last comment) and $E^c$ *positive profit* (or *negative loss*); but the example doesn't work if you flip the meanings.
Herr K.
CC BY-SA 4.0
2020-09-01T20:22:58.027Z
2020-09-01T20:22:58.027Z
Herr K.
<h2>Recurring fee for a service that <em>might</em> be used</h2>
<p>There are many business models that sell you a subscription to a service that's either meant to be used rarely in case of a need, or with the expectation that most people won't use it.</p>
<p>For the former, one example is security companies that will send a security team if a home alarm is triggered. One would hope that their home is not burgled and the alarm (almost) never triggers, and the security company is rewarded if nothing happens - the more they need to respond, the higher their costs.</p>
<p>For the latter, a good example is gym subscriptions. A key part of the business model for many gyms is the people who buy a subscription (perhaps in January as a New Year's resolution) and then stop coming - while still paying for the subscription. The company is rewarded when the customers do not use the (paid-for) service, as then they can sell more subscriptions to the same size gym without it becoming overcrowded.</p>
<p>Another example is gift cards. Stores sell gift cards that can be redeemed for goods, but a significant portion of gift cards are not spent for various reasons. Obviously, the store benefits when they have sold a gift card that never gets used.</p>

CC BY-SA 4.0
2020-09-02T09:53:31.937Z
In a lot of jurisdictions the state claims the money spent on unused gift cards, it does not turn into profit for the store. See [this Atlantic article](https://www.theatlantic.com/technology/archive/2019/08/where-do-all-unused-gift-cards-go/596860/).
Giskard
CC BY-SA 4.0
2020-09-02T01:47:53.077Z
2020-09-02T01:47:53.077Z
Peteris
<p>Could you provide examples of business models, where the service provider gets rewarded for things not happening (or at least not deteriorating). For instance, models where medics get rewarded when you do not get ill (or when you do not get worse if you have a chronic condition), to the extent that they would be making more profit this way rather than by treating severe conditions.</p>
<p>The only such model which comes to my mind is insurance. Could you come up with other examples?</p>
<hr />
<p><strong>Clarification:</strong></p>
<p>Services focused on prevention (e.g. fitness, dietary supplements, safety gear, etc) are not what I am asking about since those get rewarded regardless of the actual happening or the actual prevention of an accident.</p>
<p>For example, when you pay for dietary supplements, the manufacturer makes money regardless of whether they kept you healthy or you got sick. I am asking about a model where the manufacturer would get rewarded if you remained healthy, double rewarded if you were in a proven danger of getting sick but still remained healthy and not rewarded if you got sick.</p>

CC BY-SA 4.0
2020-09-01T10:45:25.447Z
What exactly you mean by revenue model? You can just define good/service $x$ as whatever service you can imagine in virtually any economic model and work with that.
1muflon1
CC BY-SA 4.0
2020-09-01T10:48:24.933Z
Well, I am not well versed with the terms, so I'd try to explain it with examples - for example, a doc getting paid for checkup is a revenue model. The doc getting commission payments on drugs he prescribes is another revenue model. The doc getting paid if I do not get ill for the whole next year is a third model.
drabsv
CC BY-SA 4.0
2020-09-01T10:52:35.457Z
oh but then those are not really what we would call models in economics. I guess this is business management terminology then I suppose something like business plan or strategy. In that case I don’t think this is right stack for such question.
1muflon1
CC BY-SA 4.0
2020-09-01T11:06:59.537Z
Which stack would be more appropriate? It is definitely not about business management, since management is about organizing people and processes, not about what would work in generating income and what not.
drabsv
CC BY-SA 4.0
2020-09-01T11:11:56.060Z
I called it business management because this is something that would be covered by topics studied in MBA. Probably you would want some forum for business advice/entrepreneurship. I am not sure if there is such stack, but I guess here it will be closed as off topic.
1muflon1
CC BY-SA 4.0
2020-09-01T11:56:19.747Z
The example with Coca-Cola would have been accurate if Coca Cola made money on consumers not buying soda drinks, without buying Cola at the same time (or at least this is what I have in mind with my question). Same with the airlines. For more clarity, I'll bring back the example with insurance - the insurance company would make more money by having accidents not happen or happen as few and as small as possible. They collect money in advance and profit by keeping that money when no accident had happened. Quite different from the simple sales model of beverages and airlines.
drabsv
CC BY-SA 4.0
2020-09-01T13:17:06.453Z
@1muflon1 I guess drabsv wants to compare these different business models using economics. Economics is all about peoples' responses to incentives so comparing how people respond to different incentives is definitely an economics question.
Criticize SE actions means ban
CC BY-SA 4.0
2020-09-01T13:19:37.100Z
@user253751 I would agree that would be the definition of economics. But the user says he is looking for examples and I cant see any way how to Q connects to incentives. I dont think that the user actually had an econ question in mind but English is high context language I might be wrong, if you think there is an econ question about different incentives hidden there then feel free to add an answer or not follow me in voting to close down.
1muflon1
<incentives>
Business models based on things not happening
drabsv
# Business models based on things not happening

(Asked by: username_0 on 2020-09-01)

Could you provide examples of business models, where the service provider gets rewarded for things not happening (or at least not deteriorating). For instance, models where medics get rewarded when you do not get ill (or when you do not get worse if you have a chronic condition), to the extent that they would be making more profit this way rather than by treating severe conditions.

The only such model which comes to my mind is insurance. Could you come up with other examples?

---

**Clarification:**

Services focused on prevention (e.g. fitness, dietary supplements, safety gear, etc) are not what I am asking about since those get rewarded regardless of the actual happening or the actual prevention of an accident.

For example, when you pay for dietary supplements, the manufacturer makes money regardless of whether they kept you healthy or you got sick. I am asking about a model where the manufacturer would get rewarded if you remained healthy, double rewarded if you were in a proven danger of getting sick but still remained healthy and not rewarded if you got sick.

**Tags:** incentives
> **Comments:**
> **username_1**: What exactly you mean by revenue model? You can just define good/service $x$ as whatever service you can imagine in virtually any economic model and work with that.  
> **username_0**: Well, I am not well versed with the terms, so I'd try to explain it with examples - for example, a doc getting paid for checkup is a revenue model. The doc getting commission payments on drugs he prescribes is another revenue model. The doc getting paid if I do not get ill for the whole next year is a third model.  
> **username_1**: oh but then those are not really what we would call models in economics. I guess this is business management terminology then I suppose something like business plan or strategy. In that case I don’t think this is right stack for such question.  
> **username_0**: Which stack would be more appropriate? It is definitely not about business management, since management is about organizing people and processes, not about what would work in generating income and what not.  
> **username_1**: I called it business management because this is something that would be covered by topics studied in MBA. Probably you would want some forum for business advice/entrepreneurship. I am not sure if there is such stack, but I guess here it will be closed as off topic.  
> **username_0**: The example with Coca-Cola would have been accurate if Coca Cola made money on consumers not buying soda drinks, without buying Cola at the same time (or at least this is what I have in mind with my question). Same with the airlines. For more clarity, I'll bring back the example with insurance - the insurance company would make more money by having accidents not happen or happen as few and as small as possible. They collect money in advance and profit by keeping that money when no accident had happened. Quite different from the simple sales model of beverages and airlines.  
> **username_2**: @1muflon1 I guess drabsv wants to compare these different business models using economics. Economics is all about peoples' responses to incentives so comparing how people respond to different incentives is definitely an economics question.  
> **username_1**: @user253751 I would agree that would be the definition of economics. But the user says he is looking for examples and I cant see any way how to Q connects to incentives. I dont think that the user actually had an econ question in mind but English is high context language I might be wrong, if you think there is an econ question about different incentives hidden there then feel free to add an answer or not follow me in voting to close down.  

---

## 2 answers

### Answer by username_3 on 2020-09-01. Score: 1

> Could you provide examples of business models, where the service provider gets rewarded for things not happening (or at least not deteriorating).

I think you're asking for examples of businesses that thrive on preventing "bad things" from happening. There should be plenty of those:

* Security firms prevent financial and physical losses to their clients and get paid handsomely for doing so.
* Software companies sell anti-virus programs that prevent computers from being infected by malware.
* Sports firms design gears that prevent injuries from happening during sports.
* Pharmaceutical companies produce dietary supplements to keep people healthy.
* Gyms offer facilities, trainers and courses to keep their members physically fit.
* ...

The list can go on and on and on...

> **Comments:**
> **username_0**: This is correct, but it would have been more "genuine" model if the reward was tied to the actual non-happening of a bad event. What I mean is, for instance, the pharmaceutical company getting money if you actually do not get ill as long as you take their dietary supplements and not getting money if you do get ill. This is different from the simple sale of supplements. Same about the antivirus software - the company getting rewarded if your computer remains safe and not getting any reward if your computer suffers an attack.  
> **username_3**: @drabsv: "*Same about the antivirus software - the company getting rewarded if your computer remains safe and not getting any reward if your computer suffers an attack.*" I'd argue that even insurance companies don't qualify under this criterion --- they get paid a premium whether or not there is an accident.  
> **username_3**: @drabsv: Also, your question is at a certain level semantic rather than economic. In a situation where someone gets paid when event $E$ happens and does not get paid (or gets paid less) when event $E$ does not happen (i.e. the complement $E^c$ happens), there's a large degree of semantic freedom in deciding what is $E$ and what is $E^c$. Consider the following two cases. **Case 1.** Let $E$ be the event that "*the company makes a profit*". The CEO would get paid a bonus when $E$ happens. (to be cont'd...)  
> **username_3**: (cont'd) **Case 2.** Let $E$ be the event that "*the company does not make a profit*", so that the CEO gets a bonus when $E^c$ happens. Both cases are factually the same, but they differ by semantics: the CEO gets paid in Case 1 for making something (profit) happen; whereas in Case 2, the CEO gets paid by preventing something (loss) from happening.  
> **username_0**: @ Herr K. well, insurance companies do not qualify in that particular example, but since they do lose money when an accident has happened, they are one of the closest examples.  
> **username_0**: @ Herr K. "In a situation where someone gets paid when event E happens and does not get paid (or gets paid less) when event E does not happen" - I am talking about the situation when someone gets paid when E does not happen.  
> **username_0**: @ Herr K. making profit happen and preventing loss are factually not the same.  
> **username_3**: @drabsv: My point is that what event gets called $E$ is semantics and that's largely what determines whether an example satisfies your criterion. Insurance qualifies because you take $E$ to mean *accident*, and $E^c$ *no accident*. But you could very well have taken $E$ to mean *no accident* and $E^c$ to denote *accident*, in which case insurance does not qualify. Likewise, my CEO example works if $E$ means *non-positive profit* (or *non-negative loss*, to address your last comment) and $E^c$ *positive profit* (or *negative loss*); but the example doesn't work if you flip the meanings.  

---

### Answer by username_4 on 2020-09-02. Score: -1

## Recurring fee for a service that *might* be used

There are many business models that sell you a subscription to a service that's either meant to be used rarely in case of a need, or with the expectation that most people won't use it.

For the former, one example is security companies that will send a security team if a home alarm is triggered. One would hope that their home is not burgled and the alarm (almost) never triggers, and the security company is rewarded if nothing happens - the more they need to respond, the higher their costs.

For the latter, a good example is gym subscriptions. A key part of the business model for many gyms is the people who buy a subscription (perhaps in January as a New Year's resolution) and then stop coming - while still paying for the subscription. The company is rewarded when the customers do not use the (paid-for) service, as then they can sell more subscriptions to the same size gym without it becoming overcrowded.

Another example is gift cards. Stores sell gift cards that can be redeemed for goods, but a significant portion of gift cards are not spent for various reasons. Obviously, the store benefits when they have sold a gift card that never gets used.

> **Comments:**
> **username_5**: In a lot of jurisdictions the state claims the money spent on unused gift cards, it does not turn into profit for the store. See [this Atlantic article](https://www.theatlantic.com/technology/archive/2019/08/where-do-all-unused-gift-cards-go/596860/).  

---

