PDF Ebook Put Your Money Where Your Butt Is: A Commitment Contract for Smoking Cessation
More than five decades after Strotz (1955) modeled dynamic inconsistency, debate continues over how to represent preferences for consumption over time. Introspection, casual empiricism, and laboratory evidence have motivated theorists to develop several type of models in which consumers exhibit more impatience for near-term trade-offs than for future trade-offs. The consumption of addictive substances has been a particular focus of such models. These models share the prediction that some (self-aware, or “sophisticated”) consumers will seek to voluntarily constrain their future consumption choices: they will demand commitment devices. Yet there is little field evidence on the demand for or effectiveness of such commitment devices.
We take some initial steps toward addressing the empirical viability and effectiveness of commitment devices for smoking cessation, using evidence from a field experiment in the Philippines. Some smokers were randomly assigned an opportunity to voluntarily sign a commitment contract (branded Committed Action to Reduce and End Smoking, or “CARES”) to stop smoking. A smoker signing the contract pledged his own money that he would pass a cotinine (the primary metabolite of nicotine) urine test six months later. If the CARES client passed the urine test he got his money back (no interest accrued on the account). If he failed the test the local bank offering the savings product donated the money to charity. This is essentially the performance bond contract suggested in Gruber and Koszegi (2001). A second treatment group received “cue cards,” visually aversive wallet-sized pictures that are modeled on Canada’s mandated cigarette packaging and intended to regularly remind smokers of the health risks from smoking.
Eleven percent of smokers offered the CARES contract signed up. This is comparable to takeup rates for a leading “self-help” treatment: nicotine replacement medications (patch, gum, inhaler, or nasal spray). The average client made a deposit every two weeks and ended up committing 550 pesos ($11 USD) by the end of the six-month contract period. 550 pesos is about 20% of monthly income and roughly equal to the average out-of-pocket expense for about 6 months’ worth of cigarettes incurred by CARES clients at baseline.
Our results suggest that CARES helps smokers quit. Smokers randomly offered CARES were an estimated 3.3 to 5.8 percentage points more likely to pass the 6-month urine test than the control group. But this urine test is not necessarily a good indicator of a lasting spell of smoking cessation, since the 6-month test date was scheduled up to 4 weeks in advance, and the test could be passed by abstaining from smoking for as little as a few days before the test date. So we also worked with the bank offering CARES to conduct surprise 12-month tests that would provide sharper evidence on true quits (vs. short-term, strategic ones). The 12-month results show that smokers randomly offered CARES were 3.5 to 5.7 percentage points more likely to pass the test than the control group. The analogous treatment-on-the-treated estimates are 31 to 53 percentage points.
The effect of CARES on smoking quits appears to be large. The sample mean pass rate for the surprise test was only 18% in the control group. One can also compare the effect of CARES to other treatments. Within-sample we find little evidence that the aversive cue cards affect smoking quits, and the upper bound of the cue card 12-month treatment-on-the-treated confidence interval implies an increased likelihood of surprise test passage that is 1/8 of our the comparable point estimate on CARES. The results also suggest that CARES has effects that are comparable to other treatments that have been tested using randomized trials on other samples. Volpp et al (2006) find that modest financial bonuses offered through a U.S. Veterans Affairs hospital increase short-term cessation but not lasting quits. Over-the-counter nicotine replacement medications have been tested in dozens of randomized trials and generally produced treatment-on-the-treated effects that are smaller than those found here for CARES (Stead, Perera, Bullen, Mant and Lancaster 2008).
Despite its large treatment effects a surprisingly large proportion of smokers who voluntarily commit with CARES, 66%, ended up failing to quit. This is consistent with various behavioral bias in preferences and/or expectations (partial naiveté about dynamic inconsistency, projection bias, over-confidence), and the implications of such biases for optimal contract design and treatment effectiveness is an important topic for future research.
The results in this study are unusually direct evidence on the takeup and effectiveness of a commitment device for managing the consumption of an addictive substance. The only comparable studies we know are Paxton’s (1979; 1980; 1982). These studies have three key differences from ours. First, they were administered in a highly structured and clinical setting to smokers who were already participating in a smoking cessation program. Our study includes smokers of varying smoking intensities and ex-ante dispositions toward cessation aids. Second, Paxton’s control groups received a rich set of other smoking cessation aids, including counseling, social pressure, and aversion therapy. Our study takes a more over-the-counter approach and compares the effects of CARES to a control group that receives nothing other than basic information. Third, Paxton’s analysis does not exploit random assignment.
Our study also relates to prior work on commitment devices for other decisions that may involve self-control problems. Ariely and Wertenbroch (2002) find that 37 of 51 MBA students elect to impose binding deadlines on themselves for completing class assignments. Deadlines improve task performance but students do not necessarily set them optimally. Thaler and Benartzi (2004) and Ashraf, Karlan, and Yin (2006) design new commitment products for savings and find high takeup rates and large treatment effects.
Our paper proceeds as follows: the next section describes the voluntary commitment savings product that we designed for smokers who want to quit smoking. Sections III describes the cue cards treatment. Section IV details the experimental design and implementation by Green Bank in the Philippines. Section V reports the results of the study. Section VI concludes.
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PDF Ebook Put Your Money Where Your Butt Is: A Commitment Contract for Smoking Cessation
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