NBER Study: AI Subscribers Easily Switch Providers

According to NBER Working Paper 35953, by April 2026, approximately 2.9% of American consumers pay for a major generative AI service, annual retention among major providers is 20–45%, and switching rates spike around new model releases.

Compiled by Sergey KostenchukPublished 2026-11-02Updated 2026-11-02

2026-11-02 Research OpenAI

🤖 NBER Study: AI Subscribers Easily Switch Providers

Egan, Russel, Shi, and Yao examined competition in generative AI using card transaction data—174 million consumers and 114 billion transactions. As of April 2026, approximately 2.9% of Americans pay for a major generative AI service, nearly all on basic plans under $30 per month. Annual retention among major providers is 20–45%, with transitions increasing around new model releases.

🌍 At equal model quality, substitutability will limit providers' pricing power, and surplus will shift to consumers. The industry will need to invest in noticeable model differentiation.

👤 Subscriptions to ChatGPT, Gemini, and similar services are not "forever": they can be changed with each major release to avoid overpaying. Prices are dictated by competition, not brand loyalty.

Source 1: https://www.nber.org/papers/w35953 Source 2: https://news.ycombinator.com/item?id=50331511

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