Working Paper: NBER ID: w11920
Authors: John Beshears; James J. Choi; David Laibson; Brigitte C. Madrian
Abstract: We describe a regulatory framework that helps consumers who have difficulty sticking to their own long-run plans. Early Decision regulations help long-run preferences prevail by allowing consumers to partially commit to their long-run goals, making it harder for a momentary impulse to reverse past decisions. In the cigarette market, examples of Early Decision regulations include restricting the locations or times at which cigarettes are sold, delaying the receipt of cigarettes following purchase, and allowing a consumer to choose in advance the legal restrictions on her own cigarette purchases. A formal model of Early Decision regulations demonstrates that Early Decisions are optimal when consumer preferences are heterogeneous. Intuitively, each consumer knows his own preferences, so self-rationing - which is what Early Decisions enable - is better than a one-size-fits-all regulation like a sin tax. Of course, Early Decision regulations incur social costs and therefore require empirical evaluation to determine their net social value.
Keywords: No keywords provided
JEL Codes: D11; D69; D91; H21; H31; I12; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| early decision regulations (K20) | reduced impulse purchases (D12) |
| reduced impulse purchases (D12) | facilitates quitting or cutting back on consumption (D15) |
| limiting hours of cigarette sales (D45) | reduced likelihood of impulse buying (D12) |
| regulations allowing pre-commitment (L88) | enhanced self-control (D91) |
| early decision regulations (K20) | optimal when consumer preferences are heterogeneous (D11) |