The so called flat-rate bias is a well documented phenomenon caused by consumers' desire to be insured against fluctuations in their billing amounts. This paper shows that expectation-based loss aversion provides a formal explanation for this bias. We solve for the optimal two-part tariff when...

The so called flat-rate bias is a well documented phenomenon caused by consumers’ desire to be insured against fluctuations in their billing amounts. This paper shows that expectation-based loss aversion provides a formal explanation for this bias. We solve for the optimal two-part tariff when...

In empirical demand, industrial organization, and labor economics, prices are often unobserved or unobservable since they may only be recorded when an agent transacts. In the absence of any additional information, this partial observability of prices is known to lead to a number of identi?cation...

Cost cap tariffs are pay-per-use tariffs for which costs cannot exceed a predefined cost limit. They were recently introduced to telecommunications markets, but were previously also applied in the insurance industry as deductibles or in the rental industry as day rates. This paper develops and...

Standard media economics models imply that increased platform competition decreases ad levels and that mergers reduce per-viewer ad prices. The empirical evidence, however, is mixed. We attribute the theoretical predictions to the combined assumptions that there is no advertising congestion and...

The so called flat-rate bias is a well documented phenomenon caused by consumers; desire to be insured against fluctuations in their billing amounts. This paper shows that expectation-based loss aversion provides a formal explanation for this bias. We solve for the optimal two-part tariff when...

We study the properties of a profit-maximizing monopolist's optimal price distribution when selling to a loss-averse consumer, where (following Kőszegi and Rabin (2006)) we assume that the consumer's reference point is her recent rational expectations about the purchase. If it is close to...

This paper analyzes persuasive advertising and pricing in oligopoly if firms sell differentiated products and consumers have heterogeneous social attitudes towards the consumption by others. Deriving product demand from primitives, we show that the demand-enhancing effect of persuasive...

Recent works suggest that convenient prices that match monetary denominations exhibit above-average price rigidity and are set up by firms that have incentives to be paid in cash. The relationship between convenient prices and cash usage has however never been explicitly examined. This paper...

In this paper, we study a conditional upgrade strategy that has recently emerged in the travel industry. After a consumer makes a reservation for a product (e.g., a hotel room), she is asked whether she would like to upgrade her product to a higher-quality (more expensive) one at a discounted...