Biased Beliefs without Dynamic Inconsistency
This chapter analyzes monopoly and competitive pricing in the presence of dynamically consistent consumers who hold biased beliefs regarding their future preferences. The models examined in this chapter highlight biases such as over-optimism, over-confidence and unforeseen contingencies to illuminate phenomena such as add-on pricing and three-part tariffs.
Keywords: biased beliefs, add-on pricing, three-part tariffs, over-optimism, over-confidence, unforeseen contingencies
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