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  5. Sophisticated Consumers with Inertia: Long-Term Implications from a Large-Scale Field Experiment

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Sophisticated Consumers with Inertia: Long-Term Implications from a Large-Scale Field Experiment

  • Klaus M. Miller
  • Navdeep S. Sahni
  • Avner Strulov-Shlain
American Economic Review (Forthcoming)

Abstract

Are consumers aware of their future inertia? We run a field experiment that offers over a million readers of a European newspaper auto-renewing or auto-canceling contracts. Many consumers are inert yet most anticipate and account for their inertia: though offering auto-renewing contracts benefits the firm in the short-term, it lowers subscriptions take-up by 35% and total subscribers by 23% over 20 months. Inertia’s impact on market outcomes depends on consumers’ overall awareness of it, which is often ignored by the literature, firms, and policy makers. In our context, consumer sophistication limits the firm from exploiting their behavioral limitations.

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