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Packaging of Sin Goods - Commitment or Exploitation?

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  • Julia Nafziger

    () (Department of Economics and Business, Aarhus University, Denmark)

Abstract

I consider the shopping and consumption decision of an individual with a self-control problem. The consumer believes that restricting the consumption of a sinful product (such as chips) is in his long-run interest. But when facing the actual decision he is tempted to overeat. I ask how fims react to such self-control problems, and possibly exploit them, by offering different package sizes. In a competitive market, either one or three (small, medium and large) packages are offered. In contrast to common intuition, the large, and not the small package is a commitment device. The latter serves to exploit the naive consumer.

Suggested Citation

  • Julia Nafziger, 2014. "Packaging of Sin Goods - Commitment or Exploitation?," Economics Working Papers 2014-05, Department of Economics and Business Economics, Aarhus University.
  • Handle: RePEc:aah:aarhec:2014-05
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    References listed on IDEAS

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    Cited by:

    1. Matteo Foschi, 2016. "Temptation in Markets with no Commitment: Give-aways, Scare-aways and Reversals," Discussion Papers in Economics 16/12, Department of Economics, University of Leicester.
    2. Michael D. Grubb, 2015. "Behavioral Consumers in Industrial Organization," Boston College Working Papers in Economics 879, Boston College Department of Economics.

    More about this item

    Keywords

    Quasi-hyperbolic discounting; self-control; consumer behavior; non-linear pricing;

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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