Dynamically Inconsistent Preferences III: Partial Naivete

Spiegler Ran

in Bounded Rationality and Industrial Organization

Published in print February 2011 | ISBN: 9780195398717
Published online September 2011 | e-ISBN: 9780199896790 | DOI:
Dynamically Inconsistent Preferences III: Partial Naivete

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This chapter extends the analysis of Chapter 2 to situations in which consumers can have partial degrees of naivety. The concepts of magnitude and frequency naivety are introduced and their implications for price discrimination are explored. In particular, it is shown that greater consumer sophistication is not necessarily beneficial for consumers, and that competition can make the exploitation of naïve consumers more ubiquitous.

Keywords: partial naivety; magnitude naivety; frequency naivety; projection bias; price discrimination; market exploitation; exclusion

Chapter.  3852 words.  Illustrated.

Subjects: Economics

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