Attention-driven demand for bonus contracts

Dertwinkel-Kalt, Markus; Köster, Mats; Peiseler, Florian

Attention-driven demand for bonus contracts

Dateien

Zu diesem Dokument gibt es keine Dateien.

Datum

2019

Autor:innen

Dertwinkel-Kalt, Markus

Köster, Mats

Peiseler, Florian

DOI (zitierfähiger Link)

https://doi.org/10.1016/j.euroecorev.2019.02.007

Sammlungen

Wirtschaftswissenschaften

Publikationstyp

Zeitschriftenartikel

Publikationsstatus

Published

Erschienen in

European Economic Review. Elsevier. 2019, 115, pp. 1-24. ISSN 0014-2921. eISSN 1873-572X. Available under: doi: 10.1016/j.euroecorev.2019.02.007

Zusammenfassung

In many markets supply contracts include a series of small, regular payments made by consumers and a single, large bonus that consumers receive at some point during the contractual period. But, if for instance its production costs exceed its value to consumers, such a bonus creates inefficiencies. We offer a novel explanation for the frequent occurrence of bonus contracts, which builds on a model of attentional focusing. Our main result identifies market conditions under which bonus contracts should be observed: while a monopolist pays a bonus to consumers—if at all—only for low-value goods, firms standing in competition always—i.e., independent of the consumers’ valuation—offer bonus contracts. Thus, competition does not eliminate but rather exacerbates inefficiencies arising from contracting with focused agents. Common contract schemes in markets for electricity, telephony, and bank accounts are consistent with our model, but cannot be reconciled with alternative approaches such as models on consumption smoothing, (quasi-)hyperbolic discounting, or switching costs.

Fachgebiet (DDC)

330 Wirtschaft

Schlagwörter

Attention, Focusing, Bonus contracts

Zitieren

ISO 690

DERTWINKEL-KALT, Markus, Mats KÖSTER, Florian PEISELER, 2019. Attention-driven demand for bonus contracts. In: European Economic Review. Elsevier. 2019, 115, pp. 1-24. ISSN 0014-2921. eISSN 1873-572X. Available under: doi: 10.1016/j.euroecorev.2019.02.007

BibTex

@article{DertwinkelKalt2019Atten-53482,
  year={2019},
  doi={10.1016/j.euroecorev.2019.02.007},
  title={Attention-driven demand for bonus contracts},
  volume={115},
  issn={0014-2921},
  journal={European Economic Review},
  pages={1--24},
  author={Dertwinkel-Kalt, Markus and Köster, Mats and Peiseler, Florian}
}

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