An interesting economic enigma that came my way today. Why are so many thousands of people willing to pay in advance for services such as a minimum12 month mobile phone contract or a gym membership? Yet they are not prepared to pay say £1000 or more for the right to dine for free at the their favourite restaurant for a year? Tyler Cowen over at Marginal Revolution also raises this issue.

I suspect the size of the financial commitment that people are prepared to make does make a difference and also the expected utility or benefit from having the freedom to eat your way through a year’s worth of dining rights! Diminishing returns would very likely set in pretty quickly and, for most of us, we would be unlikely to achieve good value for money.

My annual subscription to the local gym is about £50 per month - I might go 3 or 4 times and week - in busier times, less frequently even though it is only a short walk away. In contrast, a 12 month magazine subscription paid in advance can cost very little but I have rarely shown any inclination to buy magazines in advance - although they make a welcome birthday or Christmas gift!.

What else are people asked or prepared to pay for in advance over a lengthy time period? Does it affect the quality of service if the customer is captured for a minimum time?