TY - JOUR AU - DellaVigna,Stefano AU - Malmendier,Ulrike TI - Overestimating Self_Control: Evidence from the Health Club Industry JF - National Bureau of Economic Research Working Paper Series VL - No. 10819 PY - 2004 Y2 - October 2004 UR - http://www.nber.org/papers/w10819 L1 - http://www.nber.org/papers/w10819.pdf N1 - Author contact info: Stefano DellaVigna University of California, Berkeley Department of Economics 549 Evans Hall #3880 Berkeley, CA 94720-3880 Tel: 510/643-0715 Fax: 510/642-6615 E-Mail: sdellavi@econ.berkeley.edu Ulrike Malmendier Department of Economics 549 Evans Hall # 3880 University of California, Berkeley Berkeley, CA 94720-3880 Tel: 510-642-5038 E-Mail: ulrike@econ.berkeley.edu AB - Experimental evidence suggests that people make time-inconsistent choices and display overconfidence about positive personal attributes. Do these features affect consumer behavior in the market? To address this question we use a new panel data set from three US health clubs with information on the contract choices and the day-to-day attendance decisions of 7,978 health club members over three years. Members who choose a contract with a flat monthly fee of over $70 attend on average 4.8 times per month. They pay a price per expected visit of more than $17, even though a $10-per-visit fee is also available. On average, these users forgo savings of $700 during their membership. We review many aspects of the consumer behavior, including the interval between last attendance and contract termination, the survival probability, and the correlation between different consumption choices. The empirical results are difficult to reconcile with the standard assumption of time-consistent preferences and rational expectations. A model of time-inconsistent agents with overconfidence about future patience explains the findings. The agents overestimate the future attendance and delay contract cancellation whenever renewal is automatic. Salesman pressure and overstimation of future efficiency are the leading alternative explanations. ER -