The paper "Paying Not to Go to the Gym" by Stefano Della Vigna and Ulrike Malmendier examines consumer behavior in the context of choosing between different membership contracts at health clubs. The study uses a dataset from three U.S. health clubs, tracking the contractual choices and daily attendance of 7,752 members over three years. Key findings include: 1. **Contract Choice at Enrollment:** - Members who choose a monthly contract with a flat fee of over $70 pay an average of $17 per expected visit, even though they could save money by paying per visit. - These members forgo savings of about $600 during their membership. - Consumers who choose the monthly contract are 17% more likely to stay enrolled beyond one year compared to those choosing the annual contract, despite higher fees and the option to cancel monthly. 2. **Empirical Analysis:** - The deviation from standard preferences is significant, with nonsubsidized monthly members paying 70% more than they would under a pay-as-you-go contract. - The results are robust across different clubs, contract types, and samples, suggesting a consistent pattern. - Consumers overestimate their future attendance, leading to overestimation of the price per expected visit. 3. **Contract Choice Over Time:** - Low-attenders under the monthly contract delay cancellation for an average of 2.31 months. - The survival probability after one and two years is higher for annual members compared to monthly members. - Expected attendance among stayers (members who do not switch to pay-as-you-go) increases over time for both annual and monthly contracts. The study suggests that consumers' choices deviate from rational expectations, possibly due to overconfidence about future self-control or efficiency. This has significant economic implications, particularly for industries where consumer behavior is influenced by nonstandard preferences or beliefs.The paper "Paying Not to Go to the Gym" by Stefano Della Vigna and Ulrike Malmendier examines consumer behavior in the context of choosing between different membership contracts at health clubs. The study uses a dataset from three U.S. health clubs, tracking the contractual choices and daily attendance of 7,752 members over three years. Key findings include: 1. **Contract Choice at Enrollment:** - Members who choose a monthly contract with a flat fee of over $70 pay an average of $17 per expected visit, even though they could save money by paying per visit. - These members forgo savings of about $600 during their membership. - Consumers who choose the monthly contract are 17% more likely to stay enrolled beyond one year compared to those choosing the annual contract, despite higher fees and the option to cancel monthly. 2. **Empirical Analysis:** - The deviation from standard preferences is significant, with nonsubsidized monthly members paying 70% more than they would under a pay-as-you-go contract. - The results are robust across different clubs, contract types, and samples, suggesting a consistent pattern. - Consumers overestimate their future attendance, leading to overestimation of the price per expected visit. 3. **Contract Choice Over Time:** - Low-attenders under the monthly contract delay cancellation for an average of 2.31 months. - The survival probability after one and two years is higher for annual members compared to monthly members. - Expected attendance among stayers (members who do not switch to pay-as-you-go) increases over time for both annual and monthly contracts. The study suggests that consumers' choices deviate from rational expectations, possibly due to overconfidence about future self-control or efficiency. This has significant economic implications, particularly for industries where consumer behavior is influenced by nonstandard preferences or beliefs.