Economics of Immediate Gratification in Mobile Commerce

Economics of Immediate Gratification in Mobile Commerce

Kerem Tomak (University of Texas at Austin, USA)
Copyright: © 2005 |Pages: 21
DOI: 10.4018/978-1-59140-444-6.ch009
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Abstract

In this chapter we attempt to build a bridge between mobile commerce and the emerging field of behavioral economics. We first provide examples from mobile commerce and link them to behavioral economics. We then build a stylized model to assess the impact of hyperbolic discounting on the profit-maximizing behavior of a monopolist firm. We find that the monopolist makes lower profits compared to exponential discounting consumers for low levels of (positive) network externalities. As the network externalities increase, first-period prices increase, second period prices decrease and the profits increase in equilibrium.

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