Implications of Hyperbolic Discounting for Optimal Pricing and Scheduling of Unpleasant Services that Generate Future Benets

People tend to lack the self control to undergo an unpleasant service that would generate future bene…ts. This paper derives a tractable quasi-hyperbolic discounting model of that behavioral tendency (for queueing systems in which service time is short relative to the time horizon for its bene…ts). Planning in advance, people may naively overestimate their self control. This paper shows how customers’lack of self control and naivete a¤ect optimal pricing and scheduling. The socially-optimal usage fee and the revenue-maximizing usage fee decrease with customers’lack of self control. Charging for subscription, in addition or instead of per use, increases revenue, especially when subscribers are naive. If the manager can charge for subscription or per use, subscription is optimal for revenue maximization, whereas usage based pricing is optimal for welfare maximization. If customers are heterogeneous in their self control and naivete, priority scheduling can dramatically increase welfare and revenue.