Long-term contracting with time-inconsistent agents

Daniel Gottlieb () and Xingtan Zhang

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We study contracts between naive present-biased consumers and risk-neutral firms. We show that the welfare loss from present bias vanishes as the contracting horizon grows. This is true both when bargaining power is on the consumers’ and on the firms’ side, when consumers cannot commit to long-term contracts, and when firms do not know the consumers’ naiveté. However, the welfare loss from present bias does not vanish when firms do not know the consumers’ present bias or when they cannot offer exclusive contracts.

Keywords: present bias; dynamic inconsistency; regulation; behavioral industrial organization (search for similar items in EconPapers)
JEL-codes: J1 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2021-03-01
New Economics Papers: this item is included in nep-cta and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published in Econometrica, 1, March, 2021, 89(2), pp. 793 - 824. ISSN: 0012-9682

Downloads: (external link)
http://eprints.lse.ac.uk/106622/ Open access version. (application/pdf)

Related works:
Journal Article: Long‐Term Contracting With Time‐Inconsistent Agents (2021)
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:ehl:lserod:106622

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().