UC Davis Agricultural and Resource Economics

Craig McIntosh, University of California, San Diego

The controlled choice design and private paternalism in pawnshop borrowing

Date and Location

Tuesday, June 6, 2023, 4:10 PM - 5:30 PM
ARE Library Conference Room, 4101 Social Sciences and Humanities


In the context of pawnbroker lending, we show that forcing people into commitment contracts with a regular repayment structure decreases their (fee-including) financial cost by 6%, increases the likelihood of recovering their pawn by 15%, and increases the likelihood of repeat business by 20%. Using a multi-armed RCT that includes both a voluntary and a forced arm, we illustrate how to point-identify both the Treatment on the Untreated and the Treatment and the Treated. We find modest selection on gains but nonetheless significant positive benefits of commitment even for those who would not have chosen it. The justification for paternalistic commitment in this context appears to be over-optimism; 74% of clients say they will certainly recover their pawn while in fact only 43% do so.

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