[PDF][PDF] Contract design with costly convex self-control
arXiv preprint arXiv:1907.07628, 2019•arxiv.org
… First, we show that compromising contracts are strictly optimal when the cost function is
strictly convex, and second, there is always loss of efficiency. However, convex cost function
does not lend itself to comparative static analysis since there is no obvious analogue of the
willpower parameter that controls the consumer’s level of self-control. In this section, we
propose a piece-wise linear and weakly convex cost function. The position of the kink is
where the consumer’s temptation …
strictly convex, and second, there is always loss of efficiency. However, convex cost function
does not lend itself to comparative static analysis since there is no obvious analogue of the
willpower parameter that controls the consumer’s level of self-control. In this section, we
propose a piece-wise linear and weakly convex cost function. The position of the kink is
where the consumer’s temptation …
In this note, we consider the pricing problem of a profit-maximizing monopolist who faces naive consumers with convex self-control preferences.
arxiv.org
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