Eliaz, K;
Spiegler, R;
(2008)
Consumer optimism and price.
Theoretical Economics
, 3
(4)
pp. 459-497.
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Abstract
We study monopolistic design of a menu of non-linear tariffs when consumers have biased prior beliefs regarding their future preferences. In our model, consumers are "optimistic'' if their prior belief assigns too much weight to states of nature characterized by large gains from trade. A consumer's degree of optimism is his private information, and the monopolist employs the menu of non-linear tariffs to screen it. We characterize the optimal menu and show that the existence of non-common priors has significant qualitative implications for price discrimination and ex-post inefficiency. Finally, the characterization enables us to interpret aspects of real-life menus of non-linear tariffs.
| Type: | Article |
|---|---|
| Title: | Consumer optimism and price |
| Open access status: | An open access version is available from UCL Discovery |
| Publisher version: | http://econtheory.org/ojs/index.php/te/article/vie... |
| Language: | English |
| Additional information: | Copyright © 2008 Kfir Eliaz and Ran Spiegler. Licensed under the Creative Commons Attribution- NonCommercial License 3.0 . Available at http://econtheory.org |
| Keywords: | Contracts, Speculative trade, Screening, Non-common priors, Mechanism-design, Optimism, Three-part tariffs |
| URI: | https://discovery-pp.ucl.ac.uk/id/eprint/46456 |
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