Testing Alternative Learning Theories: Evidence From Subscription Contracts

Itai Ater*, Vardit Landsman

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

4 Scopus citations


Analyzing panel data of 32,650 checking-account holders facing a menu of three-part tariff contracts, we document several findings that indicate that subscribers use simple heuristics to learn about the desirability of the contracts they have chosen. Our main findings are: subscribers change contracts in a direction that diminishes the probability of re–experiencing the trigger for switching; subscribers exhibit recency effects in switching; and after switching the majority of switchers systematically pay higher fees than they did before. We argue that directional learning theory best explains why consumers behave in a manner that yields suboptimal economic outcomes.

Original languageEnglish
Pages (from-to)763-815
Number of pages53
JournalJournal of Industrial Economics
Issue number4
StatePublished - Dec 2018


FundersFunder number
Henry Crown Institute of Business Research in Israel


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