Signing commitment contracts to stay on track

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Suppose you have a goal of exercising every day. One way to help ensure you meet your goal would be to recruit a friend to help you and give that friend $1,000. You and your friend write up a contract in which you promise to go to the gym every day for the next 30 days. You’ll prove your presence at the gym by checking in on Foursquare at the location. If you hit your target, your friend returns the $1,000 in full. But if you miss more than two days of check-ins, your friend donates all $1,000 of your money to a charity you hate.

The fear of losing your $1,000—and the guilt you’ll feel if your hard-earned money goes toward funding an organization you find repugnant—provides a powerful incentive to follow through on your commitment. This is called a commitment contract—a promise that’s backed up by a “contingent punishment,” meaning if you fall through on your promise, you get hit with a penalty. It’s a fact of human nature that people often form intentions they have trouble following through on, and studies bear out that commitment contracts help them stick to their goals.

In one study(1), behavioral economist Dan Ariely performed an experiment on his own students in an executive education class at MIT. Part of the course requirements, Ariely told his students, involved writing three short papers. The students were free to turn in their papers any time before the last lecture of the semester. The only catch was that they had to decide the deadlines in advance—and once they’d committed to their deadlines, they couldn’t change them. Furthermore, they’d receive a penalty for each day a paper was past due.

A classical economist would say that a rational student should choose to hand in all three papers on the last possible day. After all, you’re still free to write your papers early if you want to, but why voluntarily limit your choices by choosing an early deadline knowing there’s a penalty for lateness?

But the results supported a different perspective: most students chose to space their deadlines out across the semester. And sure enough, these students got higher grades on their papers than a different group who’d been required only to turn in all three papers by the last day of class. The presence of a commitment to do their work early had forced them to give themselves more time to write each paper.

In another study(2), researchers studied members of an insurance company that gave people a 25 percent discount on their groceries for purchasing healthy food. The researchers decided to create a new twist on the incentive plan, offering members a voluntary opt-in precommitment plan in which they committed to increase their proportion of healthy foods by 5 percent. If they hit that target, they’d receive nothing but the satisfaction of knowing they’d made healthy food choices for themselves and their families. But if they failed, they’d forfeit their entire discount.

First, the researchers found that 36 percent of members volunteered to participate. The results showed that only people who’d volunteered for the commitment contract increased their healthy food purchases—and even those who’d failed to hit the 5% benchmark and been penalized for it still wanted to stay in the program.

Commitment contracts are now available to anyone through a website launched by two Yale professors called Stickk.com. The site allows users to commit to any goal they want and put money on the outcome, entering into a legally binding contract and agreeing to have their credit card charged if they fail. Any forfeit money goes to a charity or “anti-charity” of the user’s choice.

So far the site seems to be working: a study(3) found that when users enter into a contract on the site but don’t wager money, the success rate is 42.7 percent; but, when money is on the line, 82.8 percent reach their goal.

By voluntarily making certain behaviors prohibitively costly, people can give themselves the incentive needed to achieve the things they want to do.

?References

1. Ariely, D., & Wertenbroch, K. (2002). Procrastination, deadlines, and performance: self-control by precommitment. Psychological Science, 13, 219–224.
2. Schwartz, J., Mochon, D., Wyper, L., Maroba, J., Patel, D., & Ariely, D. (2014). Healthier by precommitment. Psychological Science, 25, 538–546.
3. John, L., Norton, M., Norris, M. (2016). Making stickK stick: The business of behavioral economics. Harvard Business Review.