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

Author

Listed:
  • 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)

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 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.

Suggested Citation

  • Katherine L. Milkman & Todd Rogers & Max H. Bazerman, 2009. "Highbrow Films Gather Dust: Time-Inconsistent Preferences and Online DVD Rentals," Management Science, INFORMS, vol. 55(6), pages 1047-1059, June.
  • Handle: RePEc:inm:ormnsc:v:55:y:2009:i:6:p:1047-1059
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    File URL: http://dx.doi.org/10.1287/mnsc.1080.0994
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde, 2012. "Interpreting Time Horizon Effects in Inter-Temporal Choice," CESifo Working Paper Series 3750, CESifo Group Munich.
    2. Abhijit Banerjee & Sendhil Mullainathan, 2010. "The Shape of Temptation: Implications for the Economic Lives of the Poor," NBER Working Papers 15973, National Bureau of Economic Research, Inc.
    3. Arthur E. Attema & Han Bleichrodt & Kirsten I. M. Rohde & Peter P. Wakker, 2010. "Time-Tradeoff Sequences for Analyzing Discounting and Time Inconsistency," Management Science, INFORMS, vol. 56(11), pages 2015-2030, November.
    4. Marcelo Resende & Eduardo Ferioli, 2014. "Magazine Subscription and Intertemporal Discounting: Some Further Evidence," CESifo Working Paper Series 5070, CESifo Group Munich.
    5. Katherine Milkman & Todd Rogers & Max Bazerman, 2010. "I’ll have the ice cream soon and the vegetables later: A study of online grocery purchases and order lead time," Marketing Letters, Springer, vol. 21(1), pages 17-35, March.
    6. Milkman, Katherine L., 2012. "Unsure what the future will bring? You may overindulge: Uncertainty increases the appeal of wants over shoulds," Organizational Behavior and Human Decision Processes, Elsevier, vol. 119(2), pages 163-176.
    7. Uri Simonsohn, 2010. "eBay's Crowded Evenings: Competition Neglect in Market Entry Decisions," Management Science, INFORMS, vol. 56(7), pages 1060-1073, July.

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