The behavioural economics of organisational inefficiency: The example of the New Zealand fitness industry

We determine the quality of exercise practitioners in New Zealand's fitness industry, given concerns expressed over quality, by constructing original data sets from publicly available information on exercise professionals and their gyms and on industry level education. We also develop a basic behavioural economics model to help determine the demand for and supply of quality exercise professionals. We find that there is a significant deterioration in the quality of practitioners engaged in this industry. Key to this ongoing problem is that clients can't and don't know everything relevant to their decisions and can't easily identify false and misleading information. This lends itself to errors in decision-making and moral hazard behaviour as clients form guesstimates as to the quality of exercise professionals and their gyms. These findings suggest that there is a market failure in the fitness industry, reducing client well-being, that can be addressed by government regulation.