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Temptation, horizontal differentiation and monopoly pricing

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dc.affiliation.dptoUC3M. Departamento de Economíaes
dc.contributor.authorGómez Miñambres, Joaquín
dc.contributor.editorUniversidad Carlos III de Madrid. Departamento de Economía
dc.date.accessioned2011-09-13T13:37:09Z
dc.date.available2011-09-13T13:37:09Z
dc.date.issued2011-07-25
dc.description.abstractWe study the implications for pricing strategies and product offerings of consumers’ temptation when the differentiation of the product is horizontal. With horizontal differentiation, the temptation state is represented by a change in the consumers’ ideal product on the Hotelling line, so that consumers have two (possibly distinct) ideal products: one when committed and another when tempted. The firm faces the following trade-off: for the consumer who diverge the most between the ideal product with temptation and commitment, if the firm positions a product close to the consumer’s temptation ideal product, it increases the consumer’s surplus when tempted but decreases surplus with commitment, which lowers the consumer’s incentive to participate. This paper shows that, because of this trade-off, the firm may exclude products that are too close to the temptation preferences in the optimal menu. Moreover, it is shown that product diversity and firm’s profits decrease with the probability of temptation and with the consumers’ awareness of their dynamic inconsistency
dc.format.mimetypeapplication/pdf
dc.identifier.issn2340-5031
dc.identifier.repecwe1124
dc.identifier.urihttps://hdl.handle.net/10016/12066
dc.identifier.uxxiDT/0000000902
dc.language.isoeng
dc.relation.ispartofseriesUC3M Working papers. Economics
dc.relation.ispartofseries11-24
dc.rightsAtribución-NoComercial-SinDerivadas 3.0 España
dc.rights.accessRightsopen access
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.ecienciaEconomía
dc.subject.jelD11
dc.subject.jelD42
dc.subject.jelD82
dc.subject.jelL11
dc.subject.jelL12
dc.subject.jelL15
dc.subject.otherTemptation
dc.subject.otherCommitment
dc.subject.otherPrice discrimination
dc.titleTemptation, horizontal differentiation and monopoly pricing
dc.typeworking paper*
dc.type.hasVersionSMUR*
dspace.entity.typePublication
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