Price Protection with Consumer’s Policy Behavior

Price Discrimination and Irrational Consumers

General Equilibrium Tax Policy with Hyperbolic Consumers *

Recently David Laibson and others have argued in favor of using hyperbolic discount functions. The purpose of this paper is to investigate whether conventional wisdom, based on the standard model with exponential discounting, also holds in the case where consumers have hyperbolic discount functions. In other words do hyperbolic preferences matter for practical policy evaluation? Within the fram...

Signaling through Price and Quality to Consumers with Fairness Concerns

Consumers with inequity aversion experience some psychological disutility when buying products at unfair prices. Empirical evidence and behavioral research suggest that consumers may perceive a firm’s price as unfair when its profit margin is too high relative to consumers’ surplus. We develop a game-theoretic model to investigate the effects of the consumer’s inequity aversion on a firm’s pric...

Price and Quality Competition with Boundedly Rational Consumers∗

We consider a market model with n rational firms (doctors) and a continuum of boundedly rational consumers (patients). Following Spiegler (2006a), we assume that patients are not familiar with the market and rely on anecdotes. We analyze the price setting game played by doctors with given, different healing qualities. Doctors know their own quality, as well as the qualities of their competitors...

Inert Consumers in Markets with Switching Costs and Price Discrimination

This paper analyzes an infinite-period oligopoly model where consumers incur costs when switching supplier. Every period only a fraction α of consumers considers switching. Firms can price-discriminate between their current customers and consumers who did not buy from the firm in the past period. In this setting, firms set relatively low introductory prices to attract new consumers. Contrary to...