Why firms’ exploitation of consumer myopia may benefit myopic consumers

Hans Zenger

Economics Letters, 2013, vol. 118, issue 2, 307-309

Abstract: Myopic consumers underestimate the likelihood with which they will require follow-on services for products they purchase. Firms have an incentive to exploit this behavioral bias by skewing their price structure toward high add-on charges. Inadvertently, this skewed price structure provides myopic consumers with a monetary incentive mechanism that tends to inhibit, rather than propel, inefficient consumption decisions.

Keywords: Consumer myopia; Pricing; Add-ons (search for similar items in EconPapers)
JEL-codes: D6 D8 L1 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:118:y:2013:i:2:p:307-309

DOI: 10.1016/j.econlet.2012.10.031

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