Behavioral Decision-Making: An Application to the Setting of Magazine Subscription Prices

Abstract

Using data from American magazines, we explore the relationship between newsstand and subscription prices and magazine characteristics. In particular, we distinguish between magazines that provide benefits in the future (investment magazines) versus those that are simply fun to read now (leisure magazines). For consumers with present bias preferences, the relative value of investment versus leisure magazines will differ in subscription versus newsstand purchases. We find that for magazines whose payoff is in the future, subscription discounts are lower, all else equal. This finding suggests that publishers may reflect the present bias preferences of consumers in their price setting behavior.

JEL Classification: L1, L2