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Satisficing Decision Procedure and Optimal Consumption-Leisure Choice

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  • Sergey Malakhov

Abstract

The paper argues that a satisficing consumer decision equalizes marginal costs of search for satisficing price with the marginal benefit of search where the marginal costs of search are equal to the marginal loss in labor income and the marginal benefit of search is equal to the marginal savings on purchase. When the liquidity constraint is soft, a consumer maximizes the utility of his consumption-leisure choice with regard to the equality of marginal values of search. Therefore, the satisficing decision becomes optimal. And the equilibrium price of the satisficing optimal choice becomes equal to the willingness to accept.

Suggested Citation

  • Sergey Malakhov, 2014. "Satisficing Decision Procedure and Optimal Consumption-Leisure Choice," International Journal of Social Science Research, Macrothink Institute, vol. 2(2), pages 138-151, September.
  • Handle: RePEc:mth:ijssr8:v:2:y:2014:i:2:p:138-151
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    References listed on IDEAS

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    1. Simon, Herbert A, 1978. "Rationality as Process and as Product of Thought," American Economic Review, American Economic Association, vol. 68(2), pages 1-16, May.
    2. Werner Güth & Gerlinde Fellner & Ev Martin, 2006. "Satisficing or Optimizing? - An Experimental Study," Papers on Strategic Interaction 2006-11, Max Planck Institute of Economics, Strategic Interaction Group.
    3. Malakhov, Sergey, 2012. "A paradox of little pre-purchase search for durables: the trade-off between prices, product lifecycle, and savings on purchases," MPRA Paper 37376, University Library of Munich, Germany.
    4. Grewal, Dhruv & Marmorstein, Howard, 1994. " Market Price Variation, Perceived Price Variation, and Consumers' Price Search Decisions for Durable Goods," Journal of Consumer Research, Oxford University Press, vol. 21(3), pages 453-460, December.
    5. Mark Aguiar & Erik Hurst, 2007. "Life-Cycle Prices and Production," American Economic Review, American Economic Association, vol. 97(5), pages 1533-1559, December.
    6. Malakhov, Sergey, 2014. "Sunk costs of consumer search: economic rationality of satisficing decision," MPRA Paper 53493, University Library of Munich, Germany.
    7. H. Leibenstein, 1950. "Bandwagon, Snob, and Veblen Effects in the Theory of Consumers' Demand," The Quarterly Journal of Economics, Oxford University Press, vol. 64(2), pages 183-207.
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    Citations

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    Cited by:

    1. Sergey MALAKHOV, 2015. "Propensity to Search: Common, Leisure, and Labor Models of Consumer Behavior," Expert Journal of Economics, Sprint Investify, vol. 3(1), pages 63-76.
    2. Sergey MALAKHOV, 2014. "Willingness to Overpay for Insurance and for Consumer Credit: Search and Risk Behavior Under Price Dispersion," Expert Journal of Economics, Sprint Investify, vol. 2(3), pages 109-119.
    3. Sergey MALAKHOV, 2016. "Law of One Price and Optimal Consumption-Leisure Choice Under Price Dispersion," Expert Journal of Economics, Sprint Investify, vol. 4(1), pages 1-8.
    4. Sergey MALAKHOV, 2014. "Slutsky Equation and Negative Elasticity of Labor Supply: Behavioral Bias or Optimal Consumption-Leisure Choice?," Expert Journal of Economics, Sprint Investify, vol. 2(2), pages 80-84.
    5. Malakhov, Sergey, 2012. "Veblen effect, search for status goods, and negative utility of conspicuous leisure," MPRA Paper 40809, University Library of Munich, Germany.
    6. Malakhov, Sergey, 2017. "Moral hazard, optimal healthcare-seeking behavior, and competitive equilibrium," MPRA Paper 81352, University Library of Munich, Germany.
    7. Malakhov, Sergey, 2014. "Sunk costs of consumer search: economic rationality of satisficing decision," MPRA Paper 53493, University Library of Munich, Germany.
    8. Malakhov, Sergey, 2013. "Money flexibility and optimal consumption-leisure choice under price dispersion," MPRA Paper 45197, University Library of Munich, Germany.
    9. Malakhov, Sergey, 2014. "Money flexibility, price elasticity, and elasticity of marginal utility of consumption," MPRA Paper 55928, University Library of Munich, Germany.

    More about this item

    Keywords

    satisficing; optimal consumption-leisure choice; consumer behavior;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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