【Time】June 16, 2014, 15:30-16:30

【Venue】Room N510 (Conference Room), Shunde Building

【Title】Dynamic pricing with time inconsistent consumers

【Speaker】Dr. Xin Chen, University of Illinois at Urbana-Champaign

【Host】Dr. Tianhu Deng

【Abstract】We propose a dynamic pricing model of a monopolist facing time inconsistent consumers. Specifically, consumers’ time inconsistent behaviors are modeled by quasi-hyperbolic discounting. Under different assumptions on consumers’ naivete regarding their time inconsistency problem, we characterize the subgame perfect equilibrium between the monopolist and the consumers. We show that pricing skimming strategies are optimal and the monopolist can gain more profits when consumers are time inconsistent. However, the monopolist does not benefit from the naivete of consumers and should educate the consumers to be aware of their time inconsistency