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Satisficing decision procedure and optimal consumption-leisure choice

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  • Malakhov, Sergey

Abstract

The paper argues that when a consumer searches for a lower price, a satisficing decision procedure equalizes marginal costs of search with its marginal benefit. The consumer can maximize the utility of his consumption-leisure choice with regard to the equality of marginal values of search. Therefore, the satisficing decision procedure results in the optimizing consumer behavior.

Suggested Citation

  • Malakhov, Sergey, 2012. "Satisficing decision procedure and optimal consumption-leisure choice," MPRA Paper 38964, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:38964
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    References listed on IDEAS

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    1. Kapteyn, Arie & Wansbeek, Tom & Buyze, Jeannine, 1979. "Maximizing or Satisficing?," The Review of Economics and Statistics, MIT Press, vol. 61(4), pages 549-563, November.
    2. 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.
    3. 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.
    4. Grewal, Dhruv & Marmorstein, Howard, 1994. "Market Price Variation, Perceived Price Variation, and Consumers' Price Search Decisions for Durable Goods," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 21(3), pages 453-460, December.
    5. Sergey MALAKHOV, 2014. "Sunk Costs Of Consumer Search: Economic Rationality Of Satisficing Decision," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 5(1), pages 56-62.
    6. Christopher D. Carroll, 2001. "A Theory of the Consumption Function, with and without Liquidity Constraints," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 23-45, Summer.
    7. H. Leibenstein, 1950. "Bandwagon, Snob, and Veblen Effects in the Theory of Consumers' Demand," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 64(2), pages 183-207.
    8. Thaler, Richard, 1980. "Toward a positive theory of consumer choice," Journal of Economic Behavior & Organization, Elsevier, vol. 1(1), pages 39-60, March.
    9. 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.
    10. Mark Aguiar & Erik Hurst, 2007. "Life-Cycle Prices and Production," American Economic Review, American Economic Association, vol. 97(5), pages 1533-1559, December.
    11. Frank J. Cesario, 1976. "Value of Time in Recreation Benefit Studies," Land Economics, University of Wisconsin Press, vol. 52(1), pages 32-41.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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    Cited by:

    1. 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.
    2. Malakhov, Sergey, 2018. "Limits to the «theorem of lemons»: demand for good cars under equilibrium price dispersion," MPRA Paper 88594, University Library of Munich, Germany.
    3. Sergey MALAKHOV, 2018. "Propensity to Search and Income Elasticity of Demand: Does the Equilibrium Really Exist?," Expert Journal of Economics, Sprint Investify, vol. 6(1), pages 15-25.
    4. Malakhov, Sergey, 2019. "Willingness to take care of good cars: from the theorem of lemons to the Coase theorem," MPRA Paper 98380, University Library of Munich, Germany.
    5. Malakhov, Sergey, 2014. "Willingness to overpay for insurance and for consumer credit: search and risk behavior under price dispersion," MPRA Paper 59720, University Library of Munich, Germany.
    6. Malakhov, Sergey, 2020. "Law of nature or invisible hand: when the satisficing purchase becomes optimal," MPRA Paper 99158, University Library of Munich, Germany.
    7. 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.
    8. Sergey MALAKHOV, 2014. "Sunk Costs Of Consumer Search: Economic Rationality Of Satisficing Decision," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 5(1), pages 56-62.
    9. 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.
    10. Sergey MALAKHOV, 2017. "Moral Hazard, Optimal Healthcare-Seeking Behavior, and Competitive Equilibrium," Expert Journal of Economics, Sprint Investify, vol. 5(2), pages 71-79.
    11. 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.
    12. Sergey MALAKHOV, 2013. "Money Flexibility And Optimal Consumption-Leisure Choice Under Price Dispersion," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 4(1), pages 77-88.
    13. Malakhov, Sergey, 2012. "Veblen effect, search for status goods, and negative utility of conspicuous leisure," MPRA Paper 40809, University Library of Munich, Germany.
    14. Malakhov, Sergey, 2014. "Money flexibility, price elasticity, and elasticity of marginal utility of consumption," MPRA Paper 55928, University Library of Munich, Germany.

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    More about this item

    Keywords

    satisficing; optimizing; consumption; leisure; search; reserve for purchases;
    All these keywords.

    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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