AbstractA consumer with diminishing marginal utility in consumption, who can search for lower prices, will balance the gains from spreading consumption evenly through time against the benefits of delaying consumption until lower prices are revealed. Optimal programs of consumption, savings and price are characterized for a general formulation of this problem. Intertemporal substitutability is measured by relative-risk aversion. Small relative-risk aversion is sufficient for the intuitive solution: As the best current price rises, more search and less consumption is done. The general model is adapted to special cases. Among other things, this shows that linear utility and sequential search implies calculable reservation prices and consumption only when search stops. However, this characterization is a consequence of the restriction to linear utility. Outside of this context reservation prices and consumption may not be calculable.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by EconWPA in its series Game Theory and Information with number 9406001.
Length: 24 pages
Date of creation: 17 Jun 1994
Date of revision: 17 Jun 1994
Note: 24 pages, TeX file, macros included
Contact details of provider:
Web page: http://220.127.116.11
Other versions of this item:
- Richard Manning & Julian Manning, . "Budget-constrained Search," Penn CARESS Working Papers 30eae25a19493dd4cdf3449d5, Penn Economics Department.
- Richard Manning & Julian Manning, . ""Budget-constrained Search''," CARESS Working Papres 95-09, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Benhabib, Jess & Bull, Clive, 1981.
"Job Search: The Choice of Intensity,"
81-28, C.V. Starr Center for Applied Economics, New York University.
- Carlson, John A & McAfee, R Preston, 1983. "Discrete Equilibrium Price Dispersion," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 480-93, June.
- Morgan, Peter B, 1983. "Search and Optimal Sample Sizes," Review of Economic Studies, Wiley Blackwell, vol. 50(4), pages 659-75, October.
- Morgan, Peter & Manning, Richard, 1985. "Optimal Search," Econometrica, Econometric Society, vol. 53(4), pages 923-44, July.
- Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July.
- Veendorp, E. C. H., 1984. "Sequential search without reservation price," Economics Letters, Elsevier, vol. 16(1-2), pages 53-57.
- McCall, John J, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, MIT Press, vol. 84(1), pages 113-26, February.
- Manning, R & Morgan, Peter B, 1982. "Search and Consumer Theory," Review of Economic Studies, Wiley Blackwell, vol. 49(2), pages 203-16, April.
- George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.