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Highbrow Films Gather Dust: A Study of Dynamic Inconsistency and Online DVD Rentals

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Author Info

  • Katherine L. Milkman

    ()
    (Harvard Business School)

  • Todd Rogers

    ()
    (Harvard Business School)

  • Max H. Bazerman

    ()
    (Harvard Business School, Negotiation, Organizations & Markets Unit)

Abstract

We report on a field study demonstrating systematic differences between the preferences people anticipate they will have over a series of options in the future and their subsequent revealed preferences over those options. Using a novel panel data set, we analyze the film rental and return patterns of a sample of online DVD rental customers over a period of four months. We predict and find that people are more likely to rent DVDs in one order and return them in the reverse order when should DVDs (e.g., documentaries) are rented before want DVDs (e.g., action films). This effect is sizeable in magnitude, with a 2% increase in the probability of a reversal in preferences (from a baseline rate of 12%) ensuing if the first of two sequentially rented movies has more should and fewer want characteristics than the second film. Similarly, we also predict and find that should DVDs are held significantly longer than want DVDs within-customer. Finally, we find that as the same customers gain more experience with online DVD rentals, their "dynamic inconsistency" is attenuated. We interpret our results as evidence that myopia has a meaningful impact on decisions in the field and that people learn about their myopia with experience, allowing them to curb its influence.

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File URL: http://www.hbs.edu/research/pdf/07-099.pdf
File Function: Revised version, 2008
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Bibliographic Info

Paper provided by Harvard Business School in its series Harvard Business School Working Papers with number 07-099.

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Length: 34 pages
Date of creation: Jun 2007
Date of revision: Apr 2008
Handle: RePEc:hbs:wpaper:07-099

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Related research

Keywords: want/should; intrapersonal conflict; dynamic inconsistency; myopia;

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  1. Nava Ashraf & Dean S. Karlan & Wesley Yin, 2005. "Tying Odysseus to the Mast: Evidence from a Commitment Savings Product in the Philippines," Working Papers, Economic Growth Center, Yale University 917, Economic Growth Center, Yale University.
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  3. Stefano DellaVigna & Ulrike Malmendier, 2006. "Paying Not to Go to the Gym," American Economic Review, American Economic Association, vol. 96(3), pages 694-719, June.
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  7. Read, Daniel & van Leeuwen, Barbara, 1998. "Predicting Hunger: The Effects of Appetite and Delay on Choice, , , ," Organizational Behavior and Human Decision Processes, Elsevier, Elsevier, vol. 76(2), pages 189-205, November.
  8. Loewenstein, George, 1996. "Out of Control: Visceral Influences on Behavior," Organizational Behavior and Human Decision Processes, Elsevier, Elsevier, vol. 65(3), pages 272-292, March.
  9. Thaler, Richard H & Shefrin, H M, 1981. "An Economic Theory of Self-Control," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(2), pages 392-406, April.
  10. David I. Laibson, 1996. "Hyperbolic Discount Functions, Undersaving, and Savings Policy," NBER Working Papers 5635, National Bureau of Economic Research, Inc.
  11. Thaler, Richard, 1981. "Some empirical evidence on dynamic inconsistency," Economics Letters, Elsevier, vol. 8(3), pages 201-207.
  12. Klaus Wertenbroch, 1998. "Consumption Self-Control by Rationing Purchase Quantities of Virtue and Vice," Marketing Science, INFORMS, INFORMS, vol. 17(4), pages 317-337.
  13. Rogers, Todd & Bazerman, Max H., 2008. "Future lock-in: Future implementation increases selection of 'should' choices," Organizational Behavior and Human Decision Processes, Elsevier, Elsevier, vol. 106(1), pages 1-20, May.
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Cited by:
  1. Katherine Lyford Milkman & Dolly Chugh & Max H. Bazerman, 2008. "How Can Decision Making Be Improved?," Harvard Business School Working Papers 08-102, Harvard Business School, revised Jul 2008.

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