Heather Royer, University of California, Santa Barbara

Who Chooses Commitment? Evidence and Welfare Implications

Abstract

This paper investigates whether offers of commitment contracts, in the form of self-imposed choice-set restrictions and penalties with no financial upside, are well-targeted tools for addressing self-control problems.

In an experiment on gym attendance (N=1,248), we examine take-up of commitment contracts, and also introduce a separate elicitation task to identify actual and perceived time inconsistency.

We find high take-up of commitment contracts for greater gym attendance, which results in significant increases in exercise. However, this take-up partly reflects a combination of noisy valuation and partial naivete about time inconsistency. We identify the presence of noisy valuation using a novel design that reveals around half of the people who take up commitment contracts for higher gym attendance also take up commitment contracts for lower gym attendance. We use a novel information treatment to show that an exogenous shock to sophistication significantly reduces demand for commitment contracts.

We also find little association between commitment contract take-up and our reduced-form and structural estimates of actual or perceived time inconsistency. Structural estimates of a model of quasi-hyperbolic discounting and gym attendance imply that offering our commitment contracts lowers consumer surplus, and is less socially efficient than utilizing linear exercise subsidies that achieve the same average change in behavior.

You can read the full research paper here

Heather Royer's research focuses primarily on Health Economics. Her current research focuses on trying to disentangle the causal effect of education on health and fertility. She also has recently become interested in how information and incentives may affect health behaviors such as eating healthy and exercising regularly. Her work has been supported by grants from the National Institutes of Health, the National Science Foundation, and the Robert Wood Johnson Foundation.

You can read more about Heather Royer here

CEBI contact: Christina Gravert