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Measuring the cost of making payment decisions

  • Shy, Oz
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This short paper proposes a simple method of calibrating for the non-monetary costs associated with using different payment plans. These non-monetary costs often lead consumers to choose a flat-rate subscription plan rather than paying separately for each unit of consumption, despite the fact that the pay-per-use plan turns out to be cheaper ex post. The calibration results hint that these costs are relatively higher for "inexpensive" services than for "expensive" services.

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File URL: http://www.sciencedirect.com/science/article/B6W5H-4RV7YDM-4/2/3bc82fcc805e5355a5e3cfd8a85b6e70
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Article provided by Elsevier in its journal Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics).

Volume (Year): 37 (2008)
Issue (Month): 6 (December)
Pages: 2411-2416

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Handle: RePEc:eee:soceco:v:37:y:2008:i:6:p:2411-2416
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620175

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  1. Pingle, Mark, 1992. "Costly optimization: an experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 17(1), pages 3-30, January.
  2. Train, Kenneth E & Ben-Akiva, Moshe & Atherton, Terry, 1989. "Consumption Patterns and Self-selecting Tariffs," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 62-73, February.
  3. Eugenio J. Miravete, 2003. "Choosing the Wrong Calling Plan? Ignorance and Learning," American Economic Review, American Economic Association, vol. 93(1), pages 297-310, March.
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  7. Glazer, Amihai & Hassin, Refael, 1982. "On the economics of subscriptions," European Economic Review, Elsevier, vol. 19(2), pages 343-356.
  8. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
  9. Kridel, Donald J. & Lehman, Dale E. & Weisman, Dennis L., 1993. "Option value, telecommunications demand, and policy," Information Economics and Policy, Elsevier, vol. 5(2), pages 125-144, July.
  10. Clay, Karen B & Sibley, David S & Srinagesh, Padmanabhan, 1992. "Ex Post vs. Ex Ante Pricing: Optional Calling Plans and Tapered Tariffs," Journal of Regulatory Economics, Springer, vol. 4(2), pages 115-38, June.
  11. Shugan, Steven M, 1980. " The Cost of Thinking," Journal of Consumer Research, University of Chicago Press, vol. 7(2), pages 99-111, Se.
  12. 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.
  13. Ronald Goettler & Karen Clay, 2006. "Tariff Choice with Consumer Learning: Sorting-Induced Biases and Illusive Surplus," GSIA Working Papers 2003-E35, Carnegie Mellon University, Tepper School of Business.
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