Dynamic nonlinear pricing: Biased expectations, inattention, and bill shock
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Grubb_Dynamic Nonlinear Pricing.pdf
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208.69 KB
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Author(s)
Grubb, Michael D.
Date Issued
January 2012
Journal
International Journal of Industrial Organization
Publisher
Elsevier
Citation
Grubb, Michael D. “Dynamic Nonlinear Pricing: Biased Expectations, Inattention, and Bill Shock.” International Journal of Industrial Organization 30, no. 3 (May 2012): 287–290.
Version
Author's final manuscript
Abstract
Recent research highlights the importance of biased expectations and inattention for nonlinear pricing in dynamic environments. Findings are: (1) Three-part tariffs, such as cellular service contracts, exploit consumer overconfidence. (2) Surprise penalty fees may be used to further exploit biased beliefs or alternatively to price discriminate more efficiently whenever consumers are inattentive. (3) Implementing the recent bill-shock agreement between cellular carriers and the FCC is predicted to harm rather than help consumers when endogenous price changes are taken into account.
MIT Department
Sloan School of Management
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Creative Commons Attribution-Noncommercial-NoDerivatives
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DOI of Published Version
https://doi.org/10.1016/j.ijindorg.2011.12.007
