Time-inconsistent Preferences and Strategic Self-control in Digital Content Consumption

This study examined consumers’ time-inconsistent preferences in digital content consumption and their strategic self-control behaviors. We used a unique dataset 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 chapters, even though a monthly subscription would significantly reduce the monetary cost. We proposed 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 volume surcharge and illustrate how it can benefit both consumers and the platform