Why firms’ exploitation of consumer myopia may benefit myopic consumers

Myopic consumers underestimate the likelihood with which they will require follow-on services for products they purchase. Firms have an incentive to exploit this behavioral bias by skewing their price structure toward high add-on charges. Inadvertently, this skewed price structure provides myopic consumers with a monetary incentive mechanism that tends to inhibit, rather than propel, inefficient consumption decisions.

MoreLess

Year of publication:	2013
Authors:	Zenger, Hans
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 118.2013, 2, p. 307-309
Publisher:	Elsevier
Subject:	Consumer myopia \| Pricing \| Add-ons

More details

Type of publication:	Article
Classification:	D6 - Welfare Economics ; D8 - Information and Uncertainty ; L1 - Market Structure, Firm Strategy, and Market Performance
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010608081