Contracts with framing

Yuval Salant; Ron Siegel

doi:10.1257/mic.20160230

Contracts with framing

Yuval Salant, Ron Siegel

Economics

Research output: Contribution to journal › Article › peer-review

14 Scopus citations

Abstract

We study a model of contracts in which a profit-maximizing seller uses framing to influence buyers' purchasing behavior. Framing temporarily affects how buyers evaluate different products, and buyers can renege on their purchases after the framing effect wears off. We characterize the optimal contracts with framing and their welfare properties in several settings. Framing that is not too strong reduces total welfare in regulated markets with homogenous buyers, but increases total welfare in markets with heterogenous buyers when the proportion of buyers with low willingness to pay is small.

Original language	English (US)
Pages (from-to)	315-346
Number of pages	32
Journal	American Economic Journal: Microeconomics
Volume	10
Issue number	3
DOIs	https://doi.org/10.1257/mic.20160230
State	Published - Aug 1 2018

All Science Journal Classification (ASJC) codes

General Economics, Econometrics and Finance

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10.1257/mic.20160230

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Contracts with framing

Abstract

All Science Journal Classification (ASJC) codes

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