TY  - JOUR
N2  - We study monopolistic design of a menu of non-linear tariffs when consumers have biased prior beliefs regarding their future preferences. In our model, consumers are "optimistic'' if their prior belief assigns too much weight to states of nature characterized by large gains from trade. A consumer's degree of optimism is his private information, and the monopolist employs the menu of non-linear tariffs to screen it. We characterize the optimal menu and show that the existence of non-common priors has significant qualitative implications for price discrimination and ex-post inefficiency. Finally, the characterization enables us to interpret aspects of real-life menus of non-linear tariffs.
VL  - 3
SN  - 1555-7561
N1  - Copyright 2008 Kfir Eliaz and Ran Spiegler. Reproduced under the Creative Commons Attribution - Non Commercial License 3.0
ID  - discovery17322
AV  - public
JF  - Theoretical Economics
EP  - 497
SP  - 459
UR  - http://econtheory.org/ojs/index.php/te/article/view/20080459
TI  - Consumer optimism and price discrimination
KW  - Contracts
KW  -  speculative trade
KW  -  screening
KW  -  non-common priors
KW  -  mechanism-design
KW  -  optimism
KW  -  three-part tariffs
IS  - 4
A1  - Eliaz, K.
A1  - Spiegler, R.
Y1  - 2008/12//
ER  -