Overestimating Self-Control: Evidence from the Health Club Industry

Stanford GSB Research Paper No. 1880

70 Pages Posted: 12 Dec 2002

See all articles by Stefano DellaVigna

Stefano DellaVigna

University of California, Berkeley; National Bureau of Economic Research (NBER)

Ulrike Malmendier

University of California, Berkeley - Department of Economics; University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2002

Abstract

Experimental evidence suggests that people make time-inconsistent choices and display overconfidence about positive personal attributes. Do these features affect consumer behavior in the market? 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 diffcult to reconcile with the standard assumption of time-consistent preferences and rational expectations. A model of time-inconsistent agents with overconfidence about future time inconsistency explains the findings. The agents overestimate the future attendance and delay contract cancellation whenever renewal is automatic.

Suggested Citation

DellaVigna, Stefano and Malmendier, Ulrike, Overestimating Self-Control: Evidence from the Health Club Industry (October 2002). Stanford GSB Research Paper No. 1880, Available at SSRN: https://ssrn.com/abstract=347520 or http://dx.doi.org/10.2139/ssrn.347520

Stefano DellaVigna (Contact Author)

University of California, Berkeley ( email )

Economics Department
549 Evans Hall #3880
Berkeley, CA 94720
United States
510-643-0715 (Phone)
510-642-6615 (Fax)

HOME PAGE: http://emlab.berkeley.edu/users/sdellavi/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ulrike Malmendier

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
(510) 642-8724 (Phone)
(510) 642-6615 (Fax)

HOME PAGE: http://www.econ.berkeley.edu/~ulrike/

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

HOME PAGE: http://www.iza.org/en/webcontent/personnel/photos/index_html?key=918

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
2,940
Abstract Views
13,386
Rank
7,696
PlumX Metrics