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Tractable Consumer Choice

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  • Sakovics, Jozsef
  • Friedman, Daniel

Abstract

We derive a rational model of separable consumer choice which can also serve as a behavioral model. The central construct is [lambda] , the marginal utility of money, derived from the consumer's rest-of-life problem. We present a robust approximation of [lambda], and show how to incorporate liquidity constraints, indivisibilities and adaptation to a changing environment. We fi nd connections with numerous historical and recent constructs, both behavioral and neoclassical, and draw contrasts with standard partial equilibrium analysis. The result is a better grounded, more flexible and more intuitive description of consumer choice.

Suggested Citation

  • Sakovics, Jozsef & Friedman, Daniel, 2013. "Tractable Consumer Choice," SIRE Discussion Papers 2013-108, Scottish Institute for Research in Economics (SIRE).
    • Handle: RePEc:edn:sirdps:533
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    File URL: http://hdl.handle.net/10943/533
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    Cited by:

    1. Zhang, Yongfeng & Zhang, Yi & Friedman, Daniel, 2017. "Economic recommendation based on pareto efficient resource allocation," Discussion Papers, Research Professorship Market Design: Theory and Pragmatics SP II 2017-503, WZB Berlin Social Science Center.
    2. Roberto Burguet & József Sákovics, 2019. "Bidding For Talent In Sport," Economic Inquiry, Western Economic Association International, vol. 57(1), pages 85-102, January.
    3. Sákovics, József, 2015. "Tractable valuations under uncertainty," Economics Letters, Elsevier, vol. 126(C), pages 68-70.
    4. Sákovics, József, 2014. "Tractable valuations under uncertainty," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 2015-41, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Zhang, Yongfeng & Zhao, Qi & Zhang, Yi & Friedman, Daniel & Zhang, Min & Liu, Yiqun & Ma, Shaoping, 2016. "Economic recommendation with surplus maximization," Discussion Papers, Research Professorship Market Design: Theory and Pragmatics SP II 2016-502, WZB Berlin Social Science Center.

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    More about this item

    Keywords

    distributed choice; moneysworth demand; value for money;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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