D ISCUSSION

The main objective of this paper is to explore consumers’ time preferences in contexts where people make choices about contract durations (e.g. subscriptions), which involve costs and benefits that are distributed over time (as opposed to the bursts of utility provided by lump sums of money). We find that consumers’ time preferences for contract extensions differ depending on whether extensions’ promotions are framed as a price discount or as bonus time. We find that consumers prefer price discounts promotions in contract extensions up to about 11 months (although the timing of this shift varies from 6 months to 14 months in our experiments) and prefer bonus time promotions thereafter.

The pattern of preferring price discounts for shorter contracts’ extensions and bonus time for longer contracts’ extensions is replicated in all studies, despite varying several parameters such as: the time at which free months are offered (the beginning vs. the end of

the subscription), the size of the base subscription rate (the magnitude effect of the monthly fee of $10 vs. $50, or the customization of this value through adaptive surveys) the time unit (weeks vs. months), the type of service offered (Internet vs. mobile phone), and whether the monetary promotion is framed as a discount or a rebate (monetary promotion in relative vs.

absolute terms).

Some could argue that a potential explanation of the preference for monetary benefits in the short run and for temporal benefits in the long run would be related to construal level theory (Liberman and Trope, 1998; Trope and Liberman, 2003). According to this theory, in the distant future, people focus on abstract attributes related to an object/ event (in our case the attribute of “time” included in an extended contract) while in the immediate future they focus on concrete and feasible attributes of the same object/ event (such as the costs included in an extended contract). However, on our reading of construal level theory, it would not predict differences in discounting between time and money when both are gains or both are losses without some ancillary assumptions. Since in our paper both money and time are presented as rewards/ benefits (in the form of discounts on longer subscriptions) and we find a strong difference in time versus money discounting, we think our results are not easily explained by construal level theory.

In fact, our result that time is discounted more than money is in line with Zaubermann and Lynch (2005) and also with Soman (1998) who found that money gain promotions

requiring time/effort to redeem became more attractive if money gain and time expenses were both delayed, rather than immediate. Our results suggest that consumer’ time preferences for subscriptions are influenced by individual’s risk tolerance and differ according to a person’s financial literacy. In fact, respondents with better financial abilities do not show a reversal of preference. In Study 6a, providing equivalency information to all consumers led to the elimination of the preference reversal and to stable preferences for longer subscription

contracts framed with a price discount. In addition, the effects we observe do not differ between samples of respondents in our studies (i.e., the U.S. English-speakers express the same preferences as the Swiss German-speakers).

The current results complement previous results regarding people’s preferences for promotions, as previous papers have found that monetary promotions, such as price

discounts, are easier to comprehend than nonmonetary promotions, such as bonus time (Campbell and Diamond 1990; Klein and Oglethorpe 1987). Therefore, the likelihood of misunderstanding and skepticism is higher for nonmonetary promotions than for price discounts, because the required level of information processing is higher (Hardesty and Bearden 2003). However, we assessed and did not find support for miscomprehension as a possible explanation of the reversal in our analyses of Study 6b.

This paper provides new insights by finding that intertemporal choices for

subscriptions are strongly influenced by the framing of the subscription’s promotion. Our studies reveal a robust pattern of preference reversal and suggest that people’s valuation of bonus time is more labile than their valuation of price discounts. This difference is suggested by (i) the moderation analyses in Study 6, where we find people with higher financial literacy better align their risk tolerance and time preference (measured by other tasks) with their subscription preferences when evaluating bonus time (while financial literacy plays a minor role in the potentially easier-to-value price discounts); and (ii) the fact that the only way we were able to extinguish the preference reversal was to provide complete information

presenting the equivalence of the frames in the choice task (thus reducing the possible need for calculations or a reliance on financial literacy).

In summary, this paper finds that people's preferences for price discounts seem to be more or less a reflection of what they truly value, insofar as these preferences are more immune to further information than bonus time promotions (while presenting additional

information makes bonus time preferences seem more similar to their preferences for price discounts). To this point, Study 6c suggests that a potential cause for the greater preference for bonus time promotions for longer contract extensions derives from people's perception of future time slack. The belief that having more time available in the future than in the present (compared to monetary resources) increases the likelihood of a preference for bonus time than price discounts promotions with longer contracts.