Subscribe, Cancel, or Renew: The Econometrics of Reading by Subscription

The authors investigate a consumer's decision of whether or not to join a bookclub, and once his/her contractual obligations are fulfilled, whether to remain as a member, cancel his/her membership outrights or cancel his/her membership and subsequently rejoin the bookclub. Since the consumer's subscription strategy depends on the transaction costs of purchasing books and on the marketing strategy adopted by bookclubs, the authors investigate why bookclubs make introductory offers and/or enforce minimum purchase requirements. Introductory offers allow bookclubs to price discriminate between consumers who self-select alternative subscription strategies. Minimum purchase requirements increase the bookclub's profit by appropriating part of the consumer surplus.