Abstract
This paper analyzes the pricing of subscription contracts and examines the relative prices of short- and long-term contracts. In a simple model we show that customers must pay a premium to buy a short contract rather than a long, and that products with a larger switching cost will exhibit a smaller short contract premium. This prediction is supported by data from the Swedish daily newspaper industry for the years 1975-1994. The paper also analyzes the use of second degree price discrimination, and finds that markets with more competition exhibit more price discrimination.