New Commitment Devices
Jon Zinman
Dartmouth College
(joint work with Dean Karlan)
AEA 2010
Terms of Engagement
• “Commitment” and “commitment device”
can mean many things
• Here, arrangements that:
– Voluntarily restrict a consumer’s future choice
set by changing prices
– Are taken primarily with aim of changing one’s
own future behavior (goal attainment)
– Are not taken strategically to influence the
behavior of others
Quick Motivation
• Commitment contract for smoking cessation
(Gine, Karlan, and Zinman 2010):
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–
–
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“Committed Action to Reduce Smoking” = “CARES”
Smoker posts money with bank (= contract provider)
Bank administers urine test after 6 months
Smoker gets money back if passes, forfeits money (to
charity) otherwise
• Large intention to treat effects: offering the
contract increases quit likelihood by 3-4pp (40%)
– This effect persists in surprise tests 6 months later
Motivation:
Some Puzzles in CARES Results
• Given large treatment effects, why is takeup rate
only 11%?
• Among takers, why is success rate only 34%?
• Some explanations have little to do with
commitment features
– Learning about new product
– Quit dynamics: trying to quit is itself a good
• And/or… sub-optimal features of the contract?
New Commitment Devices:
Some Issues and Thoughts
• My approach
– Issues with contract/program design
– Thoughts on how to improve
• Caveat: all speculative
– More theory needed
– More empirics needed
Issue 1.
Framing, Given Other Biases
• Commitment typically thought of as a solution to
time-inconsistent preferences
• But what if people have other biases as well?
– Limited awareness
– Limited attention
– Cued consumption (the Pavlov Problem)
• Also (won’t talk about today):
– Loss aversion
– Projection bias
– Exponential growth bias (how much would you save
on cigs over lifetime if stopped smoking?)
Issue 1a.
Limited Awareness
Limited awareness of:
• Nature of self-control problem will depress
takeup (“naifs”)
• Extent of self-control problem will lower
success rate, conditional on takeup
(“partial sophisticates”)
Issue 1a.
Dealing with Limited Awareness
Convert naifs, partial sophisticates into sophisticates?
• By providing information at signup: : “Most people of
your age, who smoke as much as you, require a stronger
commitment to succeed. How about increasing $, or
adding your spouse?”
• By debiasing at signup:
– Get people to think about past (failed) quit attempts
– “Have you considered a stronger commitment”
Provide stronger defaults re: contract terms?
• I.e., not clear that encouraging customization is optimal,
even if there is consumer heterogeneity
Issue 1b. Limited Attention
• What we often think of as self-control
problem may be inattention to future
– Reminders for making savings deposits more
effective for “hyperbolics” (Karlan, McConnell,
Mullainathan, Zinman)
• “A goal is not a plan”
– Psychologists find that people think more
normatively, and not sufficiently
instrumentally, about the future
– (Delivering/discussing papers)
Issue 1b.
Dealing with Limited Attention
• How convert daily struggle for commitment
into a smaller set of key decisions?
– Auto-enroll
– Buy a patch
• Solutions here:
– Process commitment (wealth habit: commit to
sign up; commit to wear patch)
– Bundle with reminders
Issue 1c.
Dealing with Cues
• Debiasing and planning at takeup?
– “Are there situations that make you want to
smoke? How do you plan to deal with those
situations?”
– “Have you thought about how you might avoid
those situations?”
• Smart defaults based on intake questions?
– “Would you like to make another commitment
to [not smoke at work]?”
Issue 2.
Substitutes or Complements?
• Can commitment make standard
treatments more effective?
– Nicotine replacement therapy
– (Financial planning/counseling)
Issue 3. Building a Mass Market
• Market providers: tension between over-the-counter
approach and binding enforcement.
– How well do self-reports or peer-reports work?
– I.e., how costly is it to lie, or get your friend to lie, to the
intermediary?
• Large employers may have strong incentives:
commitment → better health → lower insurance costs,
higher productivity?
• Focus so far on health, with bonuses rather than
commitment contracts (Volpp et al)
– Expand to financial health? (Carrell and Zinman)
– Possible that commitment is even more effective than conditional
cash transfers?
• Due to loss aversion
Summary
• Preliminary evidence that commitment
devices can be a useful tool
• Preliminary evidence that we’ve only
scratched the surface on optimal:
– Design
– Framing
– Bundling
• More R&D needed
– Interplay between theory and fieldwork