Bryan Caplan  

Do I Take Teasing Too Seriously?

The Binary Fallacy... The Future of U.S. Health Care...

When phone companies, ISPs, cable companies, and the like offer "teaser rates" ("$50 for the first three months"), I assume the worst. If their regular rate were good, they would tell me upfront. So if they won't tell me what they're real rate is, I figure it has to be bad.

In fact, whether a get a teaser offer, I almost never bother to search for the regular rate, because I don't think it the search will be worth my time.

Am I overreacting? You tell me.

Comments and Sharing

COMMENTS (16 to date)
jsalvati writes:

I think that's probably a good attitude. Teaser rates are a bad signal in general, because it means the company is fairly open to actively trying to use your psychology against you (I can't think of another reason to have teaser rates, but maybe there is one).

Garrett Harmon writes:

I've been able to tap into the producer surplus somewhat in these sorts of situations. My high-speed internet was advertised at a low rate for the first three months. When the contract came up, I tried to cancel and told them that it was too expensive. They wanted to keep me as a customer and gave me the original "gimmick" rate for my next two years.

Pierre writes:

I usually don't bother when offered a teaser rate. I'm generally quite lazy and I don't want to have to fight with a supplier to get the rate or services I want, so I'll look around first for a rate I can live with and purchase that service. Like others I often see a teaser as a bad sign and it always makes me think, "but then what?"


Matt writes:

Look at the rate and the fine print. You are probably getting occasional good deals if manipulated correctly.

Sorge L. Diaz writes:

Oh, no you are not. They are bad indeed.

Ditto for mail rebates.

Kat writes:

If you are, so am I.

All other things equal I'd rather not buy from companies who use manipulative sales tactics anyway, though sometimes there's little other choice...

(Also, I really hate businesses who won't tell you a rate at all until you come talk to a human and get the sales pitch.)

Sean writes:

Comcast gave me a really good teaser rate even though they have a monopoly on local cable service and charge the same as everyone else for Internet access. Suckers!

mjh writes:

For me, I will not pursue a teaser rate if the rate comes with a contract agreement. E.g. $X for first 3 months (with 24 month contract).

If the company that I'm buying from is willing to give me the teaser rate without a contract, that tells me that they think I'll like their service enough to keep it even at the higher rate. If they want me to agree to a contract, then it tells me that the only reason that I'm interested in the service at all is because of the teaser rate. I'm not likely to continue to like it at the higher rate. I avoid the latter.

8 writes:

You have to read the fine print. Services with low turnover offer a better chance at long-term savings, but generally they are fishing for idiots.

jib writes:

Yeah, you are over-reacting.

Very often, a teaser-rate is just a way to make the discount look bigger than it is by compressing it into the first few months. THE DISCOUNT IS STILL REAL--just smaller.

Sure, they're relying on the innumeracy of most people. But the discount, though modest, is still real.

John Thacker writes:

If your value of time is low, say as a college student, you can often keep teaser rates indefinitely, particularly by switching/threatening to switch to competitors or drop service. It can work for anyone, really, but sometimes the effort involved makes it not worth it.

Lance writes:

I suppose it depends on who is offering the teaser rate. If it's an older, established company, you may want to be more wary. If it's an upstart company, they may be using the teaser rate to get consumers accustomed to their product, tell their friends, and so forth to build up a client-base.

However, book club teaser rates are especially good now, though. I suppose the dynamics have changed since you now have the option to reject their offers on-line, as opposed to sending them back in the mail.

Jason Albert writes:

I think that because teaser rates are irrelevant to the total cost of a product, you are overreacting. When making a decision to purchase a product, a rational consumer will compare the discounted present value of the good with the discounted present cost of the good. Suppose there are two companies, A and B, selling an identical product. Suppose subscription to A's product comes with an initial teaser rate, followed by a higher rate, and that subscription to B's product comes with a constant rate. Although the A and B have different pricing mechanisms, the discounted present cost of their products MUST be equal (otherwise consumers would only buy from the company that has the lower cost). Hence, with rational consumers, teaser rates are irrelevant to total cost and not something to be wary of.

SheetWise writes:

To me it depends if there's a contract involved, and how complicated the contract is. For example, when BMG sends me an offer of 12 DVD's for $1 if I agree to buy 6 at regular price -- I can just browse the catalog, see that they're about $20 each -- so for about $121 I can buy 18 movies and cancel the contract. That's simple. So are two-for-one offers from restaurants and free or reduced price trial offers (without a contract) that are simply designed to introduce you to a product or service.

On the other hand, they're generally not worth the time -- and entering a phone, satellite, or Internet contract can be a nightmare.

Kirby writes:

I don't think you're taking the teaser rates too seriously. If they don't tell you the real rate up front you probably don't want to know what it is. Also, they probably figure that if they give you a really good rate right off you won't mind paying more in the future because you'll appreciate how good they were to you in the beginning. So they're still end up making a lot of money and you still end up paying a lot for whatever service they offer.

Chris writes:

I wanted to touch back on the issue of rebates. Rebates offer the "instant" satisfaction of what most people perceive as a lower present cost. Unless it is an instant rebate however, most mail-in or store rebates take weeks, or even months, to process and return.

Based on the time value of money, a "good" rebate would be one that compensated the original bearer with some form of interest for the duration of processing time.

If you ask me, rebates are generally a waste of time. You might be able to "save" $20 on that new printer or other consumer good, but that $20 has a lower future value than $20 at the present. Also take into account the time and effort it takes to make sure that your mail-in rebate form is exactly correct so that it isn't thrown out or rejected. Urg.

Comments for this entry have been closed
Return to top