How Should Firms Manage Excessive Product Use? A Continuous-Time Demand Model to Test Reward Schedules, Notifications, and Time Limits

Abstract

Several industries have recently been criticized by parents, think tanks, and governments for creating product environments that lead to excessive screen usage. If firms do not properly manage product usage, demand may drop, and public policy makers may intervene. The authors of this study test alternative ways to manage the use of such products: redesigning the timing of rewards, introducing notifications to users, and imposing time limits. A continuous-time demand model is proposed and empirically estimated with high-frequency data. The methodology is flexible enough to simultaneously explain multiple usage decisions that happen in quick succession, such as when to start and stop usage and how to respond to rewards or messages from the firm. The approach is implemented on a data set from the online gaming industry that includes usage decisions of a large sample of individuals. The authors find that improving reward schedules and imposing time limits leads to shorter usage sessions and longer product subscriptions—a win-win outcome. Notifications are found not to be useful to manage product usage.