Overestimating Self-Control: Evidence from the Health Club Industry
Stanford GSB Research Paper No. 1880
70 Pages Posted: 12 Dec 2002
There are 2 versions of this paper
Overestimating Self-Control: Evidence from the Health Club Industry
Overestimating Self_Control: Evidence from the Health Club Industry
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: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
A Dual Self Model of Impulse Control
By Drew Fudenberg and David K. Levine
-
A Dual Self Model of Impulse Control
By Drew Fudenberg and David K. Levine
-
By Roland Bénabou and Jean Tirole
-
Overestimating Self_Control: Evidence from the Health Club Industry
-
By Marco Battaglini, Roland Bénabou, ...
-
The Brain as a Hierarchical Organization
By Isabelle Brocas and Juan D. Carrillo
-
The Brain as a Hierarchical Organization
By Isabelle Brocas and Juan D. Carrillo
-
Put Your Money Where Your Butt is: A Commitment Contract for Smoking Cessation
By Xavier Giné, Dean S. Karlan, ...