Behavioral Biases Meet the Market: The Case of Magazine Subscription Prices
Using data from American magazines, we explore the relationship between newsstand and subscription prices and magazine characteristics. In particular, we distinguish between magazines that provide benefits in the future (investment magazines) versus those that are simply fun to read now (leisure magazines). A consumer with a present bias at the newsstand discounts the future payoff of the investment good but fully values the leisure good. This difference does not exist for subscriptions. Thus, the ratio of the subscription to newsstand willingness to pay for a magazine should differ between investment and leisure goods. We find that for magazines whose payoff is in the future, subscriptions are relatively more costly, ceteris paribus. This finding suggests that publishers reflect the present bias preferences of consumers in their price setting behavior.
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Volume (Year): 5 (2005)
Issue (Month): 1 (March)
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