Pricing implications of self-control dynamics
MetadataShow full item record
Self-control failure can arise as a result of numerous reasons; however, existing models of self-control largely overlook many of these causes. My dissertation examines two such sources of self-control failure in a buyer-seller framework. In turn, I generate new marketing insights for product categories affected by consumers' self-control limitations. My first essay examines instances in which a resolution seeker becomes demotivated after a minor lapse or slip-up. To examine this issue, I utilize a self-signaling model that accounts for the complex process in which a consumer manages his self-control perceptions during a long-term resolution. Specifically, I employ a model wherein a consumer oscillates between long-term resolution planning and short-term implementation: during each implementation juncture, the consumer must determine whether to lapse or follow through with prior resolution plans, a decision that affects his self-control perceptions in subsequent periods of long-term resolution planning. Using this framework, I derive many significant marketing insights for self-improvement programs, products which assist the pursuit of long-term resolutions. I first determine when a profit-maximizing seller prefers revenue collection through upfront fees vis-à-vis per-usage fees. I also establish when self-signaling, as a process to manage self-control perceptions, leads to higher per-usage rates. In addition, I examine the product quality implications of self-signaling and find that, under certain cost conditions, a joint product and pricing strategy reduces the likelihood of program use. Finally, I analyze the use of variable per-usage fees, determining how introductory and loyalty discounts influence self-control perceptions over time. My second essay considers the short-term psychological fatigue which results from the exercise of self-control. I utilize a model in which a consumer's cost of resisting temptation depends on his prior decisions: if he previously exercised self-control, his mental fatigue necessitates that he exert greater effort to resist temptation again. I then employ this framework to investigate a firm's sales promotion strategy when selling a product that offers immediate gratification. I determine the circumstances in which the seller offers a short-term price promotion and, when offered, how the seller times its sale with respect to fatigue.