American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Contracts with Framing
American Economic Journal: Microeconomics
(pp. 315–46)
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.Citation
Salant, Yuval, and Ron Siegel. 2018. "Contracts with Framing." American Economic Journal: Microeconomics 10 (3): 315–46. DOI: 10.1257/mic.20160230Additional Materials
JEL Classification
- D11 Consumer Economics: Theory
- D82 Asymmetric and Private Information; Mechanism Design
- D86 Economics of Contract: Theory