Behavioral insights into intertemporal choices, self-control issues and the virtues of commitment

Part 3

Previously, we discussed how the concept of time inconsistency can explain why we sometimes act against our own interest, and we identified different types of time-inconsistent decision makers. Now let’s turn to the really important part: strategies to save us from ourselves.

Trouble shooting self-control: How can we get out of the chocolate trap?

Here are two hands-on proposals for those having time-inconsistent behavior when it comes to eating chocolate. The first is to clean out the kitchen and all the other secret corners where you keep your sweets and throw away all the chocolate you might want to eat in a moment of weakness. The second is to write a check for a charity, seal it up in a stamped envelope, give it to your friend or partner and tell them to drop it in the mail if you eat too much chocolate.

What both strategies have in common is that they are based on commitment. A commitment is an arrangement entered in which you voluntarily limit the choices you will have in a hot state by making them more expensive.

At first sight, the idea of committing to an action is counterintuitive. It seems strange that we can make ourselves better off by locking us in so that we have fewer options to choose from. But when we commit to an action before our preference change, we bind ourselves to choices which correspond to our long-term goals.

If you do not refill your chocolate stockings and find yourself in a hot state later craving chocolate, you must go buy it, which dramatically increases the immediate costs of eating chocolate. If you utilize the second strategy and prepare a check, the moment you eat too much chocolate, your money is gone.

By committing to something, you tackle the initial problem of intertemporal choice: costs which would otherwise manifest in the far future are pulled forward into the present, so costs and tempting benefits of vice actions now arise at the same point in time. This helps us control our behavior and follow through with our initial plans.[1]

Sometimes, you do not even need a financial commitment, but you can use peer pressure to increase “emotional” costs. Tell your spouse, friend or doctor that you have decided to only eat two pieces of chocolate per day. Ask them for a daily check-up which requires you to report your success or failure to them. If you do not want to disappointment them, having to report your failure to them would make you very uncomfortable, and this adds to the short-term costs in the hot state.

Also, there are even tech solutions to support you. For example, at the site stickk.com, you can design a commitment contract by yourself, including a verification and sanctioning mechanism. You could build a group financial commitment with your friends and send daily pictures of the remaining chocolate to each other to verify the chocolate is still there. Money from all group participants would be pooled and at the end shared between all members who reached their goal. Or you could punish yourself in case of failure: if you cannot send a picture of the remaining chocolate because you accidentally ate it, your money is given to something you really hate (such as a rivaling sports club).

You see, just because we tend to have trouble with self-control, there is no need to worry. This is a very common problem, and using commitment can help you overcome it and achieve your long-term goals.

 

[1] Along the same line, it can help if you make beneficial choices less expensive, such as having a bowl of carrot sticks at your desk to make eating vegetables instead of chocolate more convenient, or choosing a gym that is close to your home. It is just another way of changing the short-term cost/benefit ratio of the choices you have.

 

Further reading

Frederick, Shane, George Loewenstein, and Ted O’Donoghue (2002) “Time Discounting and Time Preference: A Critical Review.” In: Journal of Economic Literature, 40 (2), S. 351-401. DOI: 10.1257/002205102320161311

Loewenstein, G.; O’Donoghue, T.; Rabin, M. (2003): Projection Bias in Predicting Future Utility. In: The Quarterly Journal of Economics 118 (4), S. 1209–1248. DOI: 10.1162/003355303322552784.

Shu, Suzanne and Gneezy, Ayelet. (2010). Procrastination of Enjoyable Experiences.  In: Journal of Marketing Research, 47 (5), S. 933-944. https://www.jstor.org/stable/20751554?seq=1#page_scan_tab_contents

Thaler, Richard H.; Sunstein, Cass R. (2009): Nudge. Improving decisions about health, wealth, and happiness. Rev. and expanded ed., with a new afterword and a new chapter. New York, NY: Penguin.

Thaler, Richard H. (1981): “Some empirical evidence on dynamic inconsistency”. In: Economic Letters, 8 (3), S. 201-207

 

About the authors

Julia Hafenrichter is currently completing her master’s thesis on the implementation of Behavioral Economics in Public Policy at University of Passau.

Julia Stauf is Director at BEHAVIA and holds a PhD in Behavioral and Experimental Economics from Cologne University.

Contact: info@behavia.de