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Spatial Commitment Devices and Addictive Goods: Evidence from the Removal of Slot Machines from Bars

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  • Hyungsuk Byun
  • Barry Scholnick

Abstract

Commitment device theory suggests that temptations to consume addictive goods could be reduced by the regulatory removal of geographically close environmental cues. We provide new evidence on this hypothesis using a quasi-natural experiment, in which gambling regulators removed slot machines from some, but not all, neighborhood bars. We find that the removal of slot machines reduced personal bankruptcies of close neighbors (within 100 meters) but not neighbors slightly farther away. This is consistent with the removal of neighborhood slots serving as an effective spatial commitment device, which reduced close neighbors? temptation to gamble, thus allowing them to avoid bankruptcy.

Suggested Citation

  • Hyungsuk Byun & Barry Scholnick, 2017. "Spatial Commitment Devices and Addictive Goods: Evidence from the Removal of Slot Machines from Bars," Working Papers 17-34, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:17-34
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    More about this item

    Keywords

    spatial commitment devices; addiction; regulation;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • K35 - Law and Economics - - Other Substantive Areas of Law - - - Personal Bankruptcy Law
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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