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Klaus Wertenbroch

Consumers often “misbehave.” They save and exercise too little; they spend, eat, and drink too much and take on too much debt; they work too hard (or too little); they smoke, take drugs, have unprotected sex, and carelessly expose their private lives on social media. These misbehaviors, often characterized as time-inconsistent choices, may entail large costs not only to the individuals concerned, but also to society as a whole. In this chapter, I discuss how policy makers can take a theory-guided experimental approach, complemented by field data, to demonstrate consumer precommitment both as a revealed preference-based criterion for evaluating the need for policy intervention and as a tool for allowing consumers to limit their misbehaviors without imposing constraints on market participants’ freedom of choice.