We develop a model in which a profit-maximizing monopolist with uncertain cost of production sells to loss-averse, yet rational, consumers. We first introduce (portable) techniques for analysing the demand of such consumers, and then investigate the monopolist’s pricing strategy. Compared to...

This review provides a critical survey of psychology-and-economics ("behavioral-economics") research in contract theory. First, I introduce the theories of individual decision making most frequently used in behavioral contract theory, and formally illustrate some of their implications in...

This paper makes two contributions to the modeling of addiction. First, we provide new and convincing evidence that smokers are forward-looking in their smoking decisions, using state excise tax increases that have been legislatively enacted but are not yet effective, and monthly data on...

This paper models behavior when a decision maker cares about and manages her self-image. In addition to having preferences over material outcomes, the agent derives “ego utility†from positive views about her ability to do well in a skill-sensitive, “ambitious,†task....

We develop a model in which a profit-maximizing monopolist with uncertain cost of production sells to loss-averse, yet rational, consumers. We first introduce (portable) techniques for analyzing the demand of such consumers, and then investigate the monopolist's pricing strategy. Compared to...