Week 7 — The Price That Never Stops

Small monthly charges are easy to underestimate. This week covers subscriptions, cheap first-month offers, forgetting to cancel, cancellation friction, and cost per actual use.

7 September 2026

Core question#

Why do small recurring prices add up so easily?

$249 once is a single number you can hold in your head. $9.99 a month is harder, because you have to multiply it by however long the subscription keeps running. That is the number many people do not work out before they sign up.

Introductory pricing and inertia#

A “$1 for the first month, then $14.99/month” offer is a reference-price problem (Week 3) stretched over time. The number that catches your eye is not the number you pay in most months. Inertia means people often keep paying because cancelling takes effort, while doing nothing lets the charge continue.

Cancellation friction#

Some services make cancelling as easy as subscribing. Many do not. A phone call, support queue, or repeated “are you sure?” screen costs time and attention. That cost is not shown on the price tag, but it still belongs in the decision.

Cost per actual use#

Week 2 separated quantity purchased from quantity used. The subscription version: a $14.99/month service used four times a month costs about $3.75 per use; used once a month, it costs $14.99 per use. The subscription price stays the same; the cost per use changes. That second number is the one to compare with a one-off alternative.

The $249 headphones#

Suppose the headphones require a $3.99/month companion app subscription for noise-cancellation profile updates. Over two years that’s roughly $96 — more than a third of the headphones’ own price — turning a one-time $249 decision into a $249 decision plus an ongoing fee that the sticker price does not show.

The $3.99/month subscription is invented for this example. No real product's app pricing is being described.

Learning outcomes#

By the end of this week, you should be able to:

• turn a recurring charge into a yearly cost, not just a monthly or weekly cost
• explain the difference between forgetting to cancel and being blocked by a hard cancellation process
• compute cost per actual use for a subscription, reusing Week 2’s usable-quantity idea
• identify an introductory-pricing offer as a reference-price problem (Week 3) stretched over time
• state why the sticker price of a subscription understates its full cost

Before class#

List every recurring charge you’re currently paying for — subscriptions, memberships, plans — and, for each, your best honest guess at how many times you actually used it last month.

In class#

Pick one subscription from the list, yours or a classmate’s, and compute its cost per actual use. Then decide: if a one-off alternative existed at a fixed price, what price would make it the better choice?

What you should leave knowing#

A recurring price is a one-off price multiplied by time. To compare it fairly with another option, use cost per actual use, not just cost per month.

Where this goes#

Week 8 looks at loyalty points: money-like numbers that come back from a purchase, and asks whether they are really worth the amount shown in the headline.