Nonlinear pricing with self-control preferences
- Nonlinear pricing with self-control preferences
- Esteban, Susanna
- Persistent URL:
- Department of Economics Discussion Papers
- Part Number:
- September 2003
- Department of Economics, Columbia University
- Publisher Location:
- New York
- 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.
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- Suggested Citation:
- Susanna Esteban, Eiichi Miyagawa, Matthew Shum, 2003, Nonlinear pricing with self-control preferences, Columbia University Academic Commons, https://doi.org/10.7916/D8000D91.