Eliaz, K. and Spiegler, R. (2006) Consumer optimism and price discrimination. (ELSE Working Papers 226). ESRC Centre for Economic Learning and Social Evolution: London, UK.
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Abstract
In many principal-agent environments, the two parties hold different prior beliefs regarding the agent's future preferences. These differences may be due to inherent biases such as over-optimism or over-pessimism. We analyze the principal's optimal contract design under the assumption that the agent's prior is private information. In order to screen the agent's prior, the principal devises a menu of contingent contracts, some of which are 'speculative' as they involve betting on the agent's future action. We characterize the optimal menu and show that the characterization enables us to interpret real-life contract design in a variety of economic contexts.
| Type: | Working / discussion paper |
|---|---|
| Title: | Consumer optimism and price discrimination |
| Open access status: | An open access version is available from UCL Discovery |
| Publisher version: | http://else.econ.ucl.ac.uk/newweb/papers.php#2006 |
| Language: | English |
| UCL classification: | UCL > School of Arts and Social Sciences > Faculty of Social and Historical Sciences > Economics |
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