Commitment Devices

People set goals. They promise to smoke less, to save more, to drink less, to work more, to eat less and to exercise more. They set goals with varying levels of formality, making promises to themselves, vows to spouses, or bets with friends. These same people regularly fail to meet their goals. They keep smoking, spend money on things they later regret, and throw out perished vegetables while eating chips. Why do people set goals, and why do they fail to reach them? These are important and difficult questions for the economics profession; they draw into doubt our model of man and problematize our definition of welfare. This paper is concerned with self-commitment devices – the arrangements people make to formalize and facilitate their goals. Broadly, a commitment device is an arrangement entered into by an individual with the aim of helping fulfill a plan for future behavior that would otherwise be difficult due to intra-personal conflict stemming, for example, from a lack of self control. We will exclude actions that accrue significant current benefits, or that are taken with a strategic motive. So, ∗Yale University †Yale University ‡Yale University §Dean Karlan would like to thank David Laibson, Matthew Rabin and Richard Thaler for conversations over the years and Nava Ashraf, Xavier Giné, Wesley Yin and Jonathan Zinman for collaboration on commitment related projects. The authors thank Julian Jamison, Richard Mansfield and Jonathan Morduch for helpful advice and the editor, Esther Duflo, for comments. Karlan is also grateful to the National Science Foundation and Sloan Foundation for support. All errors remain our own. Naturally, the phrase “commitment device” is also appropriately used to describe strategic arrangement with respect to others. However, we are limiting the scope of this paper to selfcommitment devices, as defined above.