The marginal utility of money: A modern Marshallian approach to consumer choice

József Sákovics and Daniel Friedman (University of California at Santa Cruz) ()
Authors registered in the RePEc Author Service: József Sákovics () and Daniel Friedman ()

ESE Discussion Papers from Edinburgh School of Economics, University of Edinburgh

Abstract: We reformulate neoclassical consumer choice by focusing on lamda, the marginal utility of money. As the opportunity cost of current expenditure, lamda is approximated by the slope of the indirect utility function of the continuation. We argue that lamda can largely supplant the role of an arbitrary budget constraint in partial equilibrium analysis. The result is a better grounded, more flexible and more intuitive approach to consumer choice.

Keywords: budget constraint; separability; value for money (search for similar items in EconPapers)
JEL-codes: D01 D03 D11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mic and nep-upt
Date: 2011-08-02
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Persistent link: http://EconPapers.repec.org/RePEc:edn:esedps:209

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