Suppose that most people who plan to work out at a gym are overly optimistic about how many times they will use the gym in the upcoming year. A rational gym owner might respond by selling:
A) weekly memberships at inflated prices.
B) annual or multiyear memberships.
C) daily memberships at discounted prices.
D) a monthly plan at $100 and a yearly plan at $1,500.

Question

Quizplus · Accepted Answer

Given that most people overestimate their gym usage, selling annual or multiyear memberships capitalizes on this optimism. Customers pay upfront for a long-term commitment they are likely to underutilize, benefiting the gym financially.

Suppose That Most People Who Plan to Work Out at a Gym