Which of the following is an example of a commitment device?
A) Lu-yin has part of each paycheck deposited in a vacation savings account
B) Tassili is indifferent between (a) paying $1 in three years and receiving $2 in four years or (b) paying $1 today and receiving $2 next year
C) Frank eats a piece of cake today and saves the rest of the cake for eating later

Question

Quizplus · Accepted Answer

Lu-yin is committing to saving a portion of their paycheck for a specific purpose (vacation), which is an example of a commitment device. Option B is an example of time preference, and Option C is an example of delayed gratification, but neither involves a commitment device.

Which of the Following Is an Example of a Commitment