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Commitment Contracts

Author

Listed:
  • Bryan, Gharad

    (Yale University)

  • Karlan, Dean

    (Yale University and Innovations for Poverty Action)

  • Nelson, Scott

    (Yale University)

Abstract

We review the theoretical and empirical literature on commitment devices. A commitment device is any arrangement, entered into by an individual, with the aim of making it easier to fulfill his or her own future plans. We argue that there is growing empirical evidence supporting the proposition that people demand commitment devices and that these devices can change behavior. We highlight the importance of further research exploring soft commitment--those involving only psychological costs--and the welfare consequences of hard commitments--those involving actual costs--especially in the presence of bounded rationality.

Suggested Citation

  • Bryan, Gharad & Karlan, Dean & Nelson, Scott, 2009. "Commitment Contracts," Working Papers 73, Yale University, Department of Economics.
  • Handle: RePEc:ecl:yaleco:73
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    File URL: http://economics.yale.edu/sites/default/files/files/Working-Papers/wp000/ddp0073.pdf
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    Cited by:

    1. B. Douglas Bernheim & Jonathan Meer & Neva K. Novarro, 2012. "Do Consumers Exploit Precommitment Opportunities? Evidence from Natural Experiments Involving Liquor Consumption," NBER Working Papers 17762, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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