TY  - BOOK
AU  - Einav,Liran
AU  - Klopack,Benjamin
AU  - Mahoney,Neale
ED  - National Bureau of Economic Research.
TI  - Selling Subscriptions
T2  - NBER working paper series
PY  - 2023///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
KW  - General
KW  - jelc
KW  - Information and Internet Services • Computer Software
N1  - August 2023; Hardcopy version available to institutional subscribers
N2  - Retailers are increasingly selling goods and services via subscriptions instead of spot markets. In this paper, we study one benefit to the retailer of selling subscriptions: the possibility that - presumably because of inattention or inertia - consumers continue to pay for subscriptions after the flow benefit falls below its price. We use comprehensive data from a large payment card network and focus on credit and debit cards that get replaced (e.g., due to expiration). Replaced cards require an active subscription renewal decision, and we document that months during which cards are replaced are associated with much higher rates of cancellation for the ten subscriptions we study. We write down and estimate a stylized model of subscription renewals that allows us to recover the baseline degree of inattention. We find that estimated inattention is higher for consumers that took cash advances, a proxy for low financial sophistication. Relative to a counterfactual in which consumers are fully attentive, inattention raises seller revenues by between 14% and more than 200%. We use the estimated model to explore the quantitative impact of possible regulatory remedies
UR  - https://www.nber.org/papers/w31547
UR  - http://dx.doi.org/10.3386/w31547
ER  -