Heuristics as Decison Rules - Part I: The Single Consumer
AbstractMany consumption prices are highly volatile. It would certainly overburden our cognitive system to fully adjust to all these changes. Households therefore often rely on simple heuristics when deciding what to consume, e.g. in the form of a constant budget share for a specific consumption commodity, like a vocation, or of a constantconsumption amounty for low-cost commodities as food items. Using utility functions we can measure the welfare loss, caused by such heuristics, and to what extent this can be reduced by adaptation.
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Bibliographic InfoPaper provided by Flinders of South Australia - Discipline of Economics in its series Papers with number 176.
Length: 22 pages
Date of creation: 2001
Date of revision:
Contact details of provider:
Postal: THE FLINDERS UNIVERSITY OF SOUTH AUSTRALIA, DISCIPLINE OF ECONOMICS, BEDFORD PARK, S.A. 5042 ADELAIDE AUSTRALIA.
Web page: http://www.flinders.edu.au/sabs/business/
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DECISION MAKING ; PRICING ; CONSUMPTION ; ECONOMIC MODELS;
Find related papers by JEL classification:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D10 - Microeconomics - - Household Behavior - - - General
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
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