Welfare Improving Discrimination based on Cognitive Limitations
Sürücü O (2013) Center for Mathematical Economics Working Papers; 495.
Bielefeld: Center for Mathematical Economics.
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| Veröffentlicht | Englisch
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Abstract / Bemerkung
This paper is concerned with the situation in which a profit-maximizing monopolist faces
consumers that are diverse not only in their preferences but also in their levels of bounded
rationality. The behavioral phenomenon considered here is the attraction effect when choices
are made across categories. Using the standard second-degree price discrimination model,
the optimal menu of contracts that screens consumers' types is characterized. The benefit of
discriminating consumers based on their preference and cognitive limitation is always higher
than its cost. In other words, the monopolist can exploit consumers and increase his profit
with this contract. The model provides a possible explanation for the apparent puzzle why
one may observe that the same quality products are priced differently under different labels.
Moreover, this contract is welfare improving.
Stichworte
bounded rationality;
attraction effect;
contract design;
welfare
Erscheinungsjahr
2013
Serientitel
Center for Mathematical Economics Working Papers
Band
495
Seite(n)
27
ISSN
0931-6558
Page URI
https://pub.uni-bielefeld.de/record/2901467
Zitieren
Sürücü O. Welfare Improving Discrimination based on Cognitive Limitations. Center for Mathematical Economics Working Papers. Vol 495. Bielefeld: Center for Mathematical Economics; 2013.
Sürücü, O. (2013). Welfare Improving Discrimination based on Cognitive Limitations (Center for Mathematical Economics Working Papers, 495). Bielefeld: Center for Mathematical Economics.
Sürücü, Oktay. 2013. Welfare Improving Discrimination based on Cognitive Limitations. Vol. 495. Center for Mathematical Economics Working Papers. Bielefeld: Center for Mathematical Economics.
Sürücü, O. (2013). Welfare Improving Discrimination based on Cognitive Limitations. Center for Mathematical Economics Working Papers, 495, Bielefeld: Center for Mathematical Economics.
Sürücü, O., 2013. Welfare Improving Discrimination based on Cognitive Limitations, Center for Mathematical Economics Working Papers, no.495, Bielefeld: Center for Mathematical Economics.
O. Sürücü, Welfare Improving Discrimination based on Cognitive Limitations, Center for Mathematical Economics Working Papers, vol. 495, Bielefeld: Center for Mathematical Economics, 2013.
Sürücü, O.: Welfare Improving Discrimination based on Cognitive Limitations. Center for Mathematical Economics Working Papers, 495. Center for Mathematical Economics, Bielefeld (2013).
Sürücü, Oktay. Welfare Improving Discrimination based on Cognitive Limitations. Bielefeld: Center for Mathematical Economics, 2013. Center for Mathematical Economics Working Papers. 495.
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