Long鈥怲erm Contracting With Time鈥怚nconsistent Agents.
Gottlieb, Daniel; Zhang, Xingtan. Long鈥怲erm Contracting With Time鈥怚nconsistent Agents. Econometrica, Mar2021, Vol. 89 Issue 2, p793-824,听听听听
We study contracts between naive present鈥恇iased consumers and risk鈥恘eutral firms. We show that the welfare loss from present bias vanishes as the contracting horizon grows. This is true both when bargaining power is on the consumers' and on the firms' side, when consumers cannot commit to long鈥恡erm contracts, and when firms do not know the consumers' naivet茅. However, the welfare loss from present bias does not vanish when firms do not know the consumers' present bias or when they cannot offer exclusive contracts. 听听听听
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