Behavioral economics tells us that people get hung up over upfront costs for downstream benefits. Exercise, weight loss, switching to Home Delivery… all these behaviors offer benefits that outweigh the costs, but only after getting through the immediate costs.
But “downstream” apparently doesn’t have to mean months or years in the future. Cutler and colleagues, for example, assert that the reduction in meal preparation time (due to better food processing and storage) has caused people to add additional meals to their days. As the cost of preparation (upfront cost) diminishes, people engage in the behavior (making a meal) to achieve the downstream benefit (yummy goodness). This occurs even though the costs and benefits are separated by minutes rather than months.
And so it is with typing in a URL, apparently. I noticed that GoDaddy.com’s renewal pricing varies by domain extension. My first reaction is that this must be due to the popularity of the extension, but closer examination suggested a negative correlation between the length of the extension.
Even though there are only eight extensions, the correlation is sizeable (68% of the price variation is explained by the length of the extension) and statistically significant (p = 0.007). Does typing one more letter into the URL box really matter? Apparently it does, at least enough for GoDaddy to charge a premium on the shorter extensions. (Perhaps they ought to promote GoDaddy.us instead of .com?)
Tags: Behavioral Economics, Hyperbolic Discounting, Procrastination
