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CONTRACT DESIGN AND SELF-CONTROL WITH ASYMMETRIC INFORMATION.
- Source :
-
Economic Inquiry . Apr2014, Vol. 52 Issue 2, p618-624. 7p. - Publication Year :
- 2014
-
Abstract
- We study optimal contracting by a monopolistic seller of investment goods to a time-inconsistent consumer and, in doing so, introduce asymmetric information to the model of . We find (1) the below-marginal-cost-pricing rule may fail for a low-value consumer; (2) the firm's profit is no longer unaffected by the consumer's short-run impatience, as the latter is sophisticated. We find that there is an important threshold value of short-run patience. When the consumer's short-term patience is below this level, then, as the patience increases, the firm suffers. When the consumer's short-run patience is above this threshold, then, as it increases, the firm benefits. Finally, we show that unlike monopoly, perfect competition with asymmetric information achieves the first-best outcome. (JEL D03, D82, D91 ) [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 00952583
- Volume :
- 52
- Issue :
- 2
- Database :
- Academic Search Index
- Journal :
- Economic Inquiry
- Publication Type :
- Academic Journal
- Accession number :
- 94631099
- Full Text :
- https://doi.org/10.1111/ecin.12068