Competition over Time‐Inconsistent Consumers

Daniel Gottlieb ()

Journal of Public Economic Theory, 2008, vol. 10, issue 4, 673-684

Abstract: How do firms respond to consumers' time inconsistency? This paper studies the optimal design of nonexclusive contracts under competition. It shows that nonexclusivity creates a stark asymmetry between immediate‐costs goods and immediate‐rewards goods. For immediate‐cost goods nonexclusivity does not affect the equilibrium and, when consumers are sophisticated, the efficient allocation is achieved. When consumers are partially naive, the optimal sales tax may be either positive or negative and depends on parameters that are hard to estimate. In the case of immediate‐rewards goods, however, the equilibrium features marginal‐cost pricing and is always inefficient. Moreover, the optimal tax does not depend on the consumers' degree of naiveté and is a function of parameters that are easy to assess.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (40)

Downloads: (external link)
https://doi.org/10.1111/j.1467-9779.2008.00381.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jpbect:v:10:y:2008:i:4:p:673-684

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1097-3923

Access Statistics for this article

Journal of Public Economic Theory is currently edited by Rabah Amir, Gareth Myles and Myrna Wooders

More articles in Journal of Public Economic Theory from Association for Public Economic Theory Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().