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Base consumption levels and fixed costs

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  • Randon, Emanuela
  • Simmons, Peter

Abstract

Conditioning variables on consumer choices are conventionally included in demand functions additively. We identify the underlying utility maximisation problem. There must be base consumption levels efficiently set which vary with the conditioning variables. A special case is quasi-homothetic preferences.

Suggested Citation

  • Randon, Emanuela & Simmons, Peter, 2010. "Base consumption levels and fixed costs," Economics Letters, Elsevier, vol. 108(2), pages 222-224, August.
  • Handle: RePEc:eee:ecolet:v:108:y:2010:i:2:p:222-224
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    References listed on IDEAS

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    1. Ariely, Dan & Loewenstein, George & Prelec, Drazen, 2006. "Tom Sawyer and the construction of value," Journal of Economic Behavior & Organization, Elsevier, vol. 60(1), pages 1-10, May.
    2. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
    3. Donald, Stephen G. & Hamermesh, Daniel S., 2009. "A structural model of the fixed time costs of market work," Economics Letters, Elsevier, vol. 104(3), pages 125-128, September.
    4. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
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    Cited by:

    1. Peter Simmons, 2010. "Effects of Structural Constraints and Costs on Choices," LABOUR, CEIS, vol. 24(s1), pages 25-45, December.

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