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Spatial Commitment Devices and Addictive Goods: Evidence from the Removal of Slot Machines from Bars

Hyungsuk Byun, Barry Scholnick and Hyungsuk Byun
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Hyungsuk Byun: Federal Reserve Bank of Philadelphia
Barry Scholnick: University of Alberta
Hyungsuk Byun: Government of Alberta

No 17-34, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: Commitment device theory suggests that temptations to consume addictive goods could be reduced by the regulatory removal of geographically close environmental cues. We provide new evidence on this hypothesis using a quasi-natural experiment, in which gambling regulators removed slot machines from some, but not all, neighborhood bars. We find that the removal of slot machines reduced personal bankruptcies of close neighbors (within 100 meters) but not neighbors slightly farther away. This is consistent with the removal of neighborhood slots serving as an effective spatial commitment device, which reduced close neighbors’ temptation to gamble, thus allowing them to avoid bankruptcy.

Keywords: spatial commitment devices; addiction; regulation (search for similar items in EconPapers)
JEL-codes: D12 K35 L83 (search for similar items in EconPapers)
Date: 2017-10-06
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Handle: RePEc:fip:fedpwp:17-34