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T-Space at The University of Toronto Libraries >
Theoretical Economics >
Volume 3, Number 4 (December 2008) >

Please use this identifier to cite or link to this item: http://hdl.handle.net/1807/16693

Title: Consumer optimism and price discrimination
Authors: Kfir Eliaz; Department of Economics, Brown University
Ran Spiegler; Department of Economics, University College London
Keywords: contracts, speculative trade, screening, non-common priors, mechanism-design, optimism, three-part tariffs
D42, D84, D86
Issue Date: 1-Dec-2008
Publisher: Theoretical Economics
Citation: Theoretical Economics; Vol 3, No 4 (2008)
Abstract: [This item is a preserved copy. To view the original, visit http://econtheory.org/] 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.
URI: http://hdl.handle.net/1807/16693
Other Identifiers: http://econtheory.org/ojs/index.php/te/article/view/20080459
Rights: Authors who publish in <i>Theoretical Economics</i> will release their articles under the <a href="http://creativecommons.org/licenses/by-nc/2.5/">Creative Commons Attribution-NonCommercial license</a>. This license allows anyone to copy and distribute the article for non-commercial purposes provided that appropriate attribution is given.
Appears in Collections:Volume 3, Number 4 (December 2008)

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