Overestimating self-control
Subtitle: evidence from the health club industry
By: Stefano DellaVigna, Ulrike Malmendier.
Contributors: Malmendier, Ulrike.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10819; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10819.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Self-control -- Economic aspects.; Physical fitness centers -- Economic aspects.
Description: "Experimental evidence suggests that people make time-inconsistent choices and display overconfidence about positive personal attributes.  Do these features affect consumer behavior in themarket? To address this question 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 behavior, including the interval between last attendance and contract termination, the survival probability, and the correlation between different consumption choices.  The empirical results are difficult to reconcile with the standard assumption of time-consistent preferences and rational expectations.  A model of time-inconsistent agents with overconfidence about future patience explains the findings.  The agents overestimate the future attendance and delay contract cancellation whenever renewal is automatic.  Salesman pressure and overstimation of future efficiency are the leading alternative explanations"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
Title from PDF file as viewed on 1/7/2005.
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Mode of access: World Wide Web.