Time-Inconsistent Preferences and Strategic Self-Control in Digital Content Consumption

Shuo Zhang (), Tat Y. Chan (), Xueming Luo () and Xiaoyi Wang ()
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Shuo Zhang: Department of Marketing, Shanghai Jiao Tong University, Shanghai 200240, China
Tat Y. Chan: Olin Business School, Washington University in St. Louis, St. Louis, Missouri 63130
Xueming Luo: Department of Marketing, Temple University, Philadelphia, Pennsylvania 19122
Xiaoyi Wang: Department of Marketing, Zhejiang University, Hangzhou 310027, China

Marketing Science, 2022, vol. 41, issue 3, 616-636

Abstract: This study examines consumers’ time-inconsistent preferences in digital content consumption and their strategic self-control behaviors. We used a unique data set obtained from a major digital book platform in China, where consumers can pay either by chapter or a monthly subscription. A third of consumers consistently chose to pay by chapter, even though a monthly subscription would significantly reduce the monetary cost. We propose a dynamic structural model that incorporates time-inconsistent preferences and strategic self-control behaviors to rationalize such behavior. We first analytically demonstrate the existence of a unique equilibrium and show how, under steady states, overpaying for reading can be optimal for consumers. We then estimate the model from the data. The results show that there is a large segment of price-sensitive consumers who are willing to overpay to curb future consumption. Our counterfactuals show that eliminating the pay-per-chapter option would hurt consumer welfare and the platform’s profit. Eliminating the monthly subscription plan, however, would increase the platform’s profit but reduce consumer welfare. We introduce a novel nonlinear pricing plan with a volume surcharge and illustrate how it can benefit both consumers and the platform.

Keywords: digital content consumption; consumption stock; time inconsistency; strategic self-control; pricing plans (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:41:y:2022:i:3:p:616-636

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