Academic Commons

Reports

Nonlinear pricing with self-control preferences

Esteban, Susanna; Miyagawa, Eiichi; Shum, Matthew

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.

Subjects

Files

More About This Work

Academic Units
Economics
Publisher
Department of Economics, Columbia University
Series
Department of Economics Discussion Papers, 0304-03
Published Here
March 24, 2011

Notes

September 2003

Academic Commons provides global access to research and scholarship produced at Columbia University, Barnard College, Teachers College, Union Theological Seminary and Jewish Theological Seminary. Academic Commons is managed by the Columbia University Libraries.