Willpower and compromise effect
This paper provides a behavioral foundation for modeling willpower as a limited cognitive resource that bridges the standard utility maximization and Strotz models. Using the agent's ex ante preferences and ex post choices, we derive a representation that captures key behavioral traits of willpower‐constrained decision making. We use the model to study the pricing problem of a profit‐maximizing monopolist who faces consumers with limited willpower. We show that the optimal contract often consists of three alternatives and that the consumer's choices reflect a form of the “compromise effect,” which is induced endogenously.
Year of publication: |
2020
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Authors: | Masatlioglu, Yusufcan ; Nakajima, Daisuke ; Ozdenoren, Emre |
Published in: |
Theoretical Economics. - The Econometric Society, ISSN 1933-6837, ZDB-ID 2220447-7. - Vol. 15.2020, 1, p. 279-317
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Publisher: |
The Econometric Society |
Saved in:
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