In this paper we introduce bounded rationality into the standard Mussa and Rosen (1978) model. We obtain the necessary conditions for the monopolist to benefit from the boundedly rational behavior of the consumers and discuss the incidence of costs of boundedly rational behavior. We also obtain...

In this paper I consider a monopolistic screening model with continuum of types when the type set is a disconnected subset of the real line. I prove that the product line remains connected provided that the gap in the type space is sufficiently small. I also use the results to show that the...

The paper characterizes the optimal provision of quality by a monopolist facing a population of consumers with private valuation for quality. Unlike previous models by Mussa and Rosen (1978) and others, this paper assumes there is a mass of consumers who prefer the highest quality goods. I liken...

Two kinds of theories of the boundedly rational behavior are possible. Static theories focus on stationary behavior and do not include any explicit mechanism for temporal change. Dynamic theories, on the other hand, explicitly model the fine-grain adjustments made by the subjects in response to...

The use of bounded rationality in explaining economic phenomena has attracted growing attention. In spite of this, there is still considerable disagreement regarding the meaning of bounded rationality. Basov (2005) argues that when modeling boundedly rational behaviour it is desirable to start...

In this paper I revisit the Mussa and Rosen (1978) model. However, unlike Mussa and Rosen, I assume that there is a positive mass of the consumers of the highest possible type. I call them snobs. I prove that snobs consumers are served efficiently and the product line decreases in the mass of...