Store Design with Self-Control Preferences

In this paper, we analyze the problem of store design when consumers have preferences with temptation and self-control, as introduced by Gul and Pesendorfer (2001). We say that a monopolist designs its stores when it chooses the number of stores to open and the quality and price of the goods to sell in each of them. We ask the question of whether consumers' preferences with temptation and self-control can explain a monopolist's choice between superstores and specialized stores. We find that a monopolist opens superstores to sell to some consumer types and specialized stores to sell to some others. We thus provide a demand driven explanation for the co-existence and design of multi-product and specialized stores