Betting on weight loss … and losing: personal gambles as commitment mechanisms

Abstract

Professional bookmakers rarely accept bets from individuals who directly control the outcome of the bet. We analyse a unique exception to this rule and a potential policy innovation in the battle against obesity: a weight loss betting market. If obese individuals have time-inconsistent preferences then commitment mechanisms, such as personal gambles, should help them restrain their short-term impulses and lose weight. Correspondence with the bettors confirms that this is their primary motivation. However, it appears that the bettors in our sample are not particularly skilled at choosing effective commitment mechanisms. Despite payoffs of as high as $7350, approximately 80% of people who spend money to bet on their own behaviour end up losing their bets. Empirical analysis of the betting market yields further insights. Males are treated very differently compared to females: being male is considered equivalent to having an extra 6 months to lose the same amount of weight. Movements in the market price also confirm the belief that rigidity is preferred to flexibility in setting successful weight loss targets.

Acknowledgements

We wish to thank Ted Bergstrom, Gary Charness, Marc Conte, Chris Costello, Rod Garratt, Daniel Kaffine, Matthew Kotchen, Leighton Vaughan Williams and participants at the UCSB Underground Theory seminar and at the Growth of Gambling and Prediction Markets conference for helpful comments and suggestions. We are extremely grateful to Stephanie Lynham for gathering the data and to the public relations staff at William Hill for their cooperation. All the usual disclaimers apply.

Notes

¹ In a similar vein, a very recent article by Volpp et al. (2008) finds that economic incentives produced significant weight loss during the intervention but that this loss was not maintained.

² All amounts listed in dollars have been converted from nominal British Pounds (GBP) to year 2007 US dollars.

³ See, for example, www.stickK.com and www.fatbet.net

⁴ The amount to be wagered is set by William Hill and is typically around $140. William Hill then requests additional information from the bettor, including age, gender and starting weight.

⁵ Examples of language used include: ‘I’ve tried every diet, and I can do just brilliantly for three days, then for all my hard work and misery, my husband rewards me with a Cornetto Magnifico [ice-cream], my favourite. Then, the next day, I feel like I’ve ruined everything, so give up all together’; ‘… tried joining two gyms and other exercise and diet programmes over the years but so far nothing has worked’.

Table 1. Pre-bet correspondence frequencies

⁶ Examples of language used include: ‘I hope you will choose to accept my bet as this will give me a great incentive to finally lose the weight that I should have done long ago’; ‘I wonder if looking to a reward of money might keep me on track’.

⁷ The cost of a one page black and weight advertisement in The Sun, the main outlet for weight bets stories, is approximately $41 000. Source: http://www.ngn-advertising.com/

⁸ This is because winning bets tend to be big news stories. We have performed Lexis-Nexis searches for any weight loss bets, and to the best of our knowledge, we are not missing any winning bets.

⁹ Dividing the potential payoff by the duration of the bet in weeks gives an average weekly incentive of $99.

Table 2. Summary statistics

¹⁰ Although it is possible that the motivation for betting on weight loss is just like any other betting market (enjoyment, risk-seeking or profit-making), there are a number of features of this market that suggest bettors are using bets primarily to tackle perceived self-control problems. First, the bettors themselves state that they are signing up for weight loss bets because they need a commitment mechanism. This strongly accords with behavioural models of time-inconsistent preferences. Not a single bettor explained their motivation for making the bet in terms of the thrill or enjoyment of gambling. Second, there are significant costs for the bettor that make weight bets different to standard gambles. Aside from the obvious cost of losing weight there are considerable transactions costs: for example, each bettor must arrange at least one and possibly two consultations with their local doctor. Finally, the amounts being wagered are not frivolous (the average wager is $143).

¹¹ This finding is generally supported by the medical and exercise literature (McArdle et al., 2006; Whaley et al., 2006).

Table 3. Odds regressed on bettor characteristics

¹² This is a similar test to the experiments by Ariely and Wertenbroch (2002), who find that regularly spaced and exogenously imposed deadlines improve the performance of subjects on various tasks relative to subjects with a single final deadline.

¹³ This approach assumes that the key measure of a bet's difficulty is the daily weight loss rate and not the total weight to be lost.

¹⁴ The controls are the same as before: the bettor's gender, age, starting weight and the duration of the bet.

¹⁵ See, for example, the promising results in Volpp et al. (2008).