It is often argued that people might take on too much high-cost debt because they are present focused and/or over-optimistic about how soon they will repay. We measure borrowers’ present focus and over-optimism using an experiment with a large payday lender. Although the most inexperienced quartile of borrowers under-estimate their likelihood of future borrowing, the more experienced three quartiles predict correctly on average. This finding contrasts sharply with priors we elicited from 103 payday lending and behavioural economics experts, who believed that the average borrower would be highly overoptimistic about getting out of debt. Borrowers are willing to pay a significant premium for an experimental incentive to avoid future borrowing, which we show implies that they perceive themselves to be time inconsistent. We use borrowers’ predicted behaviour and valuation of the experimental incentive to estimate a model of present focus and naivete. We then use the model to study common payday lending regulations. In our model, banning payday loans reduces welfare relative to existing regulation, while limits on repeat borrowing might increase welfare by inducing faster repayment that is more consistent with long-run preferences.

Public recognition is frequently used to motivate desirable behavior, yet its welfare effects—such as costs of shame or gains from pride— are rarely measured. We develop a portable empirical methodology for measuring and monetizing social image utility, and we deploy it in experiments on exercise and charitable behavior. In all experiments, public recognition motivates desirable behavior but creates highly unequal image payoffs. High-performing individuals enjoy significant utility gains, while low-performing individuals incur significant utility losses. We estimate structural models of social signaling, and we use the models to explore the social efficiency of public recognition policies.

This article investigates whether offers of commitment contracts, in the form of self-imposed choice-set restrictions and penalties with no financial upside, are well-targeted tools for addressing self-control problems. In an experiment on gym attendance (N=1,248), we examine take-up of commitment contracts and also introduce a separate elicitation task to identify actual and perceived time inconsistency. There is high take-up of commitment contracts for greater gym attendance, resulting in significant increases in exercise. However, this take-up is influenced both by noisy valuation and incorrect beliefs about one’s time inconsistency. Approximately half of the people who take up commitment contracts for higher gym attendance also take up commitment contracts for lower gym attendance. There is little association between commitment contract take-up and reduced-form and structural estimates of actual or perceived time inconsistency. A novel information treatment providing an exogenous shock to awareness of time inconsistency reduces demand for commitment contracts. Structural estimates of a model of quasi-hyperbolic discounting and gym attendance imply that offering our commitment contracts lowers consumer surplus and is less socially efficient than utilizing linear exercise subsidies that achieve the same average change in behaviour.