Consumption theory with reference dependent utility

Fredrik W. Andersson

The Journal of Socio-Economics, 2009, vol. 38, issue 3, pages 415-420

Abstract: This paper presents a closed form consumption function for an individual when his utility depends both on his own current and previous consumption and on the consumption by his relevant others. Given this model, I argue that we can introduce an alternative definition of marginal propensity to consume (MPC) in addition to the traditional definition. This alternative definition can be called the individual's total MPC, which I show is smaller than the traditional MPC.

Keywords: Consumption; decision; Consumption; by; relevant; others; Habit-formation; behavior; Marginal; propensity; to; consume (search for similar items in EconPapers)
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:eee:soceco:v:38:y:2009:i:3:p:415-420

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