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Nonlinear pricing with self-control preferences

Susanna Esteban; Eiichi Miyagawa; Matthew Shum

Title:
Nonlinear pricing with self-control preferences
Author(s):
Esteban, Susanna
Miyagawa, Eiichi
Shum, Matthew
Date:
Type:
Working papers
Department:
Economics
Permanent URL:
Series:
Department of Economics Discussion Papers
Part Number:
0304-03
Publisher:
Department of Economics, Columbia University
Publisher Location:
New York
Abstract:
This paper studies optimal nonlinear pricing for a monopolist when consumers' preferences exhibit temptation and self-control as in Gul and Pesendorfer (2001a). Consumers are subject to temptation inside the store but exercise self-control, and those foreseeing large self-control costs do not enter the store. Consumers differ in their preferences under temptation. When all consumers are tempted by more expensive, higher quality choices, the optimal menu is a singleton, which saves consumers from self-control and extracts consumers' commitment surplus. When some consumers are tempted by cheaper, lower quality choices, the optimal menu may contain a continuum of choices.
Subject(s):
Economics, Commerce-Business
Item views:
156
Metadata:
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