Wednesday, September 12, 2012

Contracts with people with self-control problems

A common problem is to set commitments with people who dont have full self-control (including ourselves). There is a long literature on self-commitments and I will summarise this at a later stage. Another emerging literature is how to set incentives to maximise the likelihood of a good outcome when the other party has self-control problems. I will use this post to summarise relevant papers on this issue. There are several areas where this is relevant, including how to set assessments in modules to maximise student performance, how to collaborate with co-authors, how to set debt and wage contracts more generally. A well-cited paper by Ariely and Wertenbroch showed that forcing students to submit assignments in evenly spaced intervals rather than giving them choice across the whole module interval substantially increased test scores. The paper below by Mullainathan et al demonstrates a significant role for self-control and commitment in worker productivity and points towards a role for commitment clauses in contracts even when such contracts are strictly dominated by contracts not containing them. Suggestions welcome on other areas this is relevant and papers to include. 


Ariely, Dan; Wertenbroch, Klaus (2002), "Procrastination, Deadlines, and Performance: Self-Control by Precommitment", Psychological Science 13 (3): 219–224,doi:10.1111/1467-9280.00441, PMID 12009041

Mullainathan, S, Kaur S, Kremer M. 2011. Self-Control at Work: Evidence from a Field Experiment.

Thaler, R.H., and H.M. Shefrin. 1981. “An Economic Theory of Self-Control,” Journal of
Political Economy. 89: 392-406.

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