John Beshears

Harvard University and NBER

James J. Choi

Yale University and NBER

Christopher Harris

University of Cambridge

David Laibson

Harvard University and NBER

Brigitte C. Madrian

Harvard University and NBER

Jung Sakong

University of Chicago

November 2, 2013

Abstract: If individuals have self-control problems that lead them to spend money that they had

previously planned to save, they may take up commitment contracts that restrict their spending. We experimentally investigate how the demand for commitment contracts is affected by contract

design. Each experimental subject receives an endowment of money and divides that money

between a liquid account, which permits unrestricted withdrawals, and a commitment account, which imposes a penalty on early withdrawals. The features of the liquid account are the same

for all subjects, but the features of the commitment account are randomized across subjects. The

commitment account that disallows early withdrawals—the most illiquid commitment account—

attracts more money than any other commitment account. We extend the theoretical work of

Amador, Werning, and Angeletos (2006) to show that the pattern of experimental commitment

account allocations arises in a leading model of intertemporal choice under natural assumptions.