Self-Control in the Market: Evidence from the Health Club Industry
Abstract/Contents
- Abstract
- Experimental evidence suggests that people make time-inconsistent choices. Does time inconsistency affect consumer behavior in the market? Furthermore, are consumers aware of their time inconsistency? To address these questions we use a new panel data set from three US health clubs with information on the contract choices and the day-to-day attendance decisions of 7,978 health club members over three years. Members who choose a contract with a flat monthly fee of over $70 attend on average 4.8 times per month. They pay a price per expected visit of more than $17, even though a $10-per-visit fee is also available. On average, these users forgo savings of $700 during their membership. We review many aspects of the consumer choices, including the interval between last attendance and contract termination, the survival probability, and the correlation between different behaviors. The empirical results are difficult to reconcile with the standard assumption of time-consistent preferences and rational expectations. We present a model of (partially) naive hyperbolic agents that explains the findings. The agents overestimate the future attendance and delay contract cancellation whenever renewal is automatic.
Description
Type of resource | text |
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Form | online resource |
Extent | 1 online resource |
Place | Stanford (Calif.) |
Publisher | Stanford Institute for Theoretical Economics |
Publication date | 2002 |
Language | English |
Digital origin | born digital |
Creators/Contributors
Author | DellaVigna, Stefano | |
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Author | Malmendier, Ulrike | |
Speaker | DellaVigna, Stefano |
Subjects
Genre | Conference papers and proceedings |
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Bibliographic information
Note | Presented at SITE on August 1, 2002 |
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Session series |
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Session |
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Location | https://purl.stanford.edu/qv075zx3124 |
Repository | Stanford Institute for Theoretical Economics |
Access conditions
- Use and reproduction
- This publication is open for research use. Copyright is retained by the author(s) or their heir(s).
Collection
Stanford Institute for Theoretical Economics (SITE) Archives
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