Contract Design with Costly Convex Self-Control

TL;DR

This paper investigates how a monopolist can optimally design contracts when selling to consumers who have convex self-control preferences, which complicates pricing strategies.

Contribution

It introduces a novel analysis of contract design considering consumers with costly convex self-control, an area less explored in traditional pricing models.

Findings

Optimal pricing strategies are derived for convex self-control preferences.

Consumers' self-control costs significantly influence contract structure.

The model reveals new insights into consumer behavior and monopolist profit maximization.

Abstract

In this note, we consider the pricing problem of a profit-maximizing monopolist who faces naive consumers with convex self-control preferences.