Paper #992

Títol:

Selling to consumers with endogenous types

Autors:

Jan Boone i Joel Shapiro

Data:

Agost 2006

Resum:

For many goods (such as experience goods or addictive goods), consumers’ preferences may change over time. In this paper, we examine a monopolist’s optimal pricing schedule when current consumption can affect a consumer’s valuation in the future and valuations are unobservable. We assume that consumers are anonymous, i.e. the monopolist can’t observe a consumer’s past consumption history. For myopic consumers, the optimal consumption schedule is distorted upwards, involving substantial discounts for low valuation types. This pushes low types into higher valuations, from which rents can be extracted. For forward looking consumers, there may be a further upward distortion of consumption due to a reversal of the adverse selection effect; low valuation consumers now have a strong interest in consumption in order to increase their valuations. Firms will find it profitable to educate consumers and encourage forward looking behavior.

Paraules clau:

Endogenous types, experience goods, addictive goods, price discrimination

Codis JEL:

D42, D82, L12

Àrea de Recerca:

Economia Laboral, Pública, de Desenvolupament i de la Salut

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