The complexity of the consumer problem

Itzhak Gilboa, Andrew Postlewaite and David Schmeidler

Research in Economics, 2021, vol. 75, issue 1, 96-103

Abstract: A literal interpretation of neo-classical consumer theory suggests that the consumer solves a very complex problem. In the presence of indivisible goods, the consumer problem is NP-Hard, and it appears unlikely that it can be optimally solved by a human. Two implications of this observation are that (i) households may imitate each other’s choices; (ii) households may adopt heuristics that give rise to the phenomenon of mental accounting.

Keywords: Consumer theory; Computational complexity; Mental accounting (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reecon:v:75:y:2021:i:1:p:96-103

DOI: 10.1016/j.rie.2021.01.001

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