Tractable Consumer Choice

Daniel Friedman and József Sákovics

Edinburgh School of Economics Discussion Paper Series from Edinburgh School of Economics, University of Edinburgh

Abstract: We derive a rational model of separable consumer choice which can also serve as a behavioral model. The central construct is lambda, the marginal utility of money, derived from the consumer's rest-of-life problem. We present a robust approximation of lambda, and show how to incorporate liquidity constraints, indivisibilities and adaptation to a changing environment. We find connections with numerous historical and recent constructs, both behavioral and neoclassical, and draw contrasts with standard partial equilibrium analysis. The result is a better grounded, more flexible and more intuitive description of consumer choice.

Keywords: distributed choice; moneysworth demand; value for money (search for similar items in EconPapers)
JEL-codes: D01 D03 D11 (search for similar items in EconPapers)
Pages: 40
Date: 2013-12
New Economics Papers: this item is included in nep-sog and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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http://www.econ.ed.ac.uk/papers/id240_esedps.pdf

Related works:
Journal Article: Tractable consumer choice (2015)
Working Paper: Tractable consumer choice (2015)
Working Paper: Tractable Consumer Choice (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:edn:esedps:240

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