ABC News' Susan Welsh reports:
When Las Vegas entrepreneur Lana Fuchs wants her kids to get straight A's she might offer them VIP tickets to the Grammys or throw them a $1 million party, or even have world famous designers come to her home for a customized shopping spree.
In short, she bribes her children. But is that such a bad thing?
As president and CEO of Billionaire Mafia Enterprises, a fashion lifestyle brand and record label, Fuchs can pretty much afford any lavish treats her children desire, but she insists that they work hard. "They say bribing, I say rewarding," Fuchs said. Fuchs, who also runs a successful life coaching business, believes this tactic validates the behavior she'd like to see and therefore motivates her children to do better and to set higher goals and expectations for themselves.
Watch the full story on "20/20: Xtreme Parents" Friday at 10 p.m. ET.
But rewarding children for performance could be a big mistake, according to psychologist and parenting expert Dr. Phil McGraw.
"Rewards are clearly better than punishment in terms of shaping a child's behavior," says McGraw. "But you have to be careful because if the rewards get too big, too lavish, then you actually wind up undermining their internal motivation."
Not everyone agrees. Although many parents are far less wealthy than the Fuchs clan, recent studies have shown that many parents admit to giving their children some kind of incentive for good grades and good behavior, for instance allowing them an extra 30 minutes on the computer or staying up past bedtime. An economist at the University of Chicago has found that certain types of bribery are more effective than others.
"We all want our kids to do better in school, so we think of different incentives to use on them," said John List, an economics professor. "Look, the government wants us to buy a green car or a car that uses less fuel, so they give us incentives or subsidies to buy fuel efficient cars. What I'm advocating is giving people incentives to behave in a way that we want them to behave."
List conducts experiments with students at a local middle school. He takes a group of underachieving students and offers them $20 to perform better on a test.
"We tell them if you perform well on this test, you can keep the $20, and if you do not perform well, we will take the $20 back from you," List said. "What we find time and time again is that when you give someone a reward that they care about and threaten to take it back, they will then work harder on that task."
So maybe bribing isn't all that bad after all. Still, most experts agree that true rewards come from praise and encouragement. As Fuchs puts it, perhaps praise is enough "but my children get praise, love, affection and gifts."