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Nonlinear Pricing with Self-Control Preferences

  • Esteban, Susanna

    (Pennsylvania State University)

  • Miyagawa, Eiichi

    (Columbia University)

  • Shum, Matthew

    (Johns Hopkins University)

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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File URL: http://pages.stern.nyu.edu/~dbackus/Exotic/1Incons%20and%20temptation/EstebanMiyagawaShum%20pricing%20with%20control%20Mar%2004.pdf
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Paper provided by Pennsylvania State University, Department of Economics in its series Working Papers with number 10-03-1.

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Date of creation: Sep 2003
Handle: RePEc:ecl:peneco:10-03-1
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  1. Per Krusell & Burhanettin Kuruscu & Anthony A. Smith, Jr., 2000. "Temptation and Taxation," GSIA Working Papers 2001-12, Carnegie Mellon University, Tepper School of Business.
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  22. Kalyan Chatterjee & R. Vijay Krishna, 2005. "Menu Choice, Environmental Cues and Temptation: A “Dual Self” Approach to Self-control," Levine's Working Paper Archive 784828000000000576, David K. Levine.
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  25. David Besanko & Shabtai Donnenfeld & Lawrence J. White, 1987. "Monopoly and Quality Distortion: Effects and Remedies," The Quarterly Journal of Economics, Oxford University Press, vol. 102(4), pages 743-767.
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