Comment by hiAndrewQuinn
5 days ago
Incorrect, strictly speaking I'm spending $20 on the option to visit the gym for a month, just like how you might sound $20 for the option of using Netflix for a month.
Options provide value to the purchaser even when they are not exercised. It is a common but grave error to model options the same way one would model a simpler pay-per-usage style service for that reason. We might as well start telling people they can't buy monthly bus passes if they don't use them every day.
But as I noted, there is nothing stopping you keeping that option. It is perfectly fine for you to pay for the option if you want to keep paying for it, even without using it. That is perfectly efficient. The inefficiency is when you want to cancel in order to spend the money elsewhere and you're unable to do so because the subscription is hard to cancel. At that point you no longer want the service, you want to spend your money on cakes, but you cannot.