IDEAS home Printed from https://ideas.repec.org/a/eee/soceco/v37y2008i6p2411-2416.html
   My bibliography  Save this article

Measuring the cost of making payment decisions

Author

Listed:
  • Shy, Oz

Abstract

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.

Suggested Citation

  • Shy, Oz, 2008. "Measuring the cost of making payment decisions," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(6), pages 2411-2416, December.
  • Handle: RePEc:eee:soceco:v:37:y:2008:i:6:p:2411-2416
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/B6W5H-4RV7YDM-4/2/3bc82fcc805e5355a5e3cfd8a85b6e70
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Pingle, Mark, 1992. "Costly optimization: an experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 17(1), pages 3-30, January.
    2. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
    3. Richard H. Thaler, 2008. "Mental Accounting and Consumer Choice," Marketing Science, INFORMS, vol. 27(1), pages 15-25, 01-02.
    4. Oster Sharon M. & Scott Morton Fiona M., 2005. "Behavioral Biases Meet the Market: The Case of Magazine Subscription Prices," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-32, March.
    5. 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.
    6. 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.
    7. Shugan, Steven M, 1980. " The Cost of Thinking," Journal of Consumer Research, Oxford University Press, vol. 7(2), pages 99-111, Se.
    8. 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.
    9. 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.
    10. Glazer, Amihai & Hassin, Refael, 1982. "On the economics of subscriptions," European Economic Review, Elsevier, vol. 19(2), pages 343-356.
    11. 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 115-138, June.
    12. Drazen Prelec & George Loewenstein, 1998. "The Red and the Black: Mental Accounting of Savings and Debt," Marketing Science, INFORMS, vol. 17(1), pages 4-28.
    13. 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.
    Full references (including those not matched with items on IDEAS)

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:soceco:v:37:y:2008:i:6:p:2411-2416. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/620175 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.