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Highbrow Films Gather Dust: Time-Inconsistent Preferences and Online DVD Rentals

  • Katherine L. Milkman

    ()

    (Harvard Business School, Harvard University, Boston, Massachusetts 02163)

  • Todd Rogers

    ()

    (Analyst Institute, Arlington, Virginia 22209)

  • Max H. Bazerman

    ()

    (Harvard Business School, Harvard University, Boston, Massachusetts 02163)

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 should DVDs (e.g., documentaries) are held significantly longer than want DVDs (e.g., action films) within customer. Similarly, we also predict and find that people are more likely to rent DVDs in one order and return them in the reverse order when should DVDs are rented before want DVDs. Specifically, a 1.3% increase in the probability of a reversal in preferences (from a baseline rate of 12%) ensues if the first of two sequentially rented movies has more should and fewer want characteristics than the second film. Finally, we find that as the same customers gain more experience with online DVD rentals, the extent to which they hold should films longer than want films decreases. Our results suggest that present bias has a meaningful impact on choice in the field, and that people may learn about their present bias with experience and, as a result, gain the capacity to curb its influence.

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File URL: http://dx.doi.org/10.1287/mnsc.1080.0994
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Article provided by INFORMS in its journal Management Science.

Volume (Year): 55 (2009)
Issue (Month): 6 (June)
Pages: 1047-1059

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Handle: RePEc:inm:ormnsc:v:55:y:2009:i:6:p:1047-1059
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  1. Ted O'Donoghue and Matthew Rabin ., 1997. "Doing It Now or Later," Economics Working Papers 97-253, University of California at Berkeley.
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  10. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
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