Heuristics as Decison Rules - Part I: The Single Consumer
Many 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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|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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