Willpower and Compromise Effect
Yusufcan Masatlioglu, Daisuke Nakajima, and Emre Ozdenoren
,
1
(
15
)
Theoretical Economics
279-317
January
2020
Abstract
This paper provides a behavioral foundation for the willpower as limited cognitive resource model which bridges the standard utility maximization and the Strotz models. Using the agent's ex ante preferences and ex post choices, we derive a representation that captures key behavioral traits of willpower constrained decision making. We use the model to study the pricing problem of a profit-maximizing monopolist who faces consumers with limited willpower.