Salience and (Non-)Buyer's Remorse: Optimal Nonlinear Pricing with Cognitively Constrained Consumers

Nonlinear pricing theory predicts that firms extract surplus by inducing consumers to self-sort into ex-post optimal contracts. Large-scale subscription experiments at Lyft reveal deviations from frictionless sorting. We develop a structural model in which ex-ante subscription choice is affected by salience failures, forecast errors, and impulsivity, while conditional consumption remains utility-maximizing. Consumer preferences and behavioral primitives remain nonparametrically identified. Counterfactuals show a frictionless subscription program raises profits by 5.72% over optimal linear pricing, but estimated frictions nearly eliminate these gains. Recovering a meaningful share requires substantial friction mitigation and within-firm, cross-team coordination. We explore contract-designs that mitigate costly non-subscribership.