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Money flexibility and optimal consumption-leisure choice under price dispersion

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  • Malakhov, Sergey

Abstract

The synthesis of the G.Sigler’s rule of the optimal search with the classical individual labor supply model enlarges the understanding of the phenomenon of money flexibility. The constraints of the search model makes the Lagrangian multiplier equal to the marginal utility of the wage rate and establish the correspondence between the purchase price elasticity of the marginal utility of consumption expenditures, the wage rate elasticity of the marginal utility of money, and the wage rate elasticity of purchase prices. This correspondence can review the “leisure model” of behavior as well as the Veblen effect. The phenomenon of the sunk costs sensitivity also becomes more understandable.

Suggested Citation

  • Malakhov, Sergey, 2013. "Money flexibility and optimal consumption-leisure choice under price dispersion," MPRA Paper 45197, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:45197
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    References listed on IDEAS

    as
    1. Malakhov, Sergey, 2012. "Veblen effect, search for status goods, and negative utility of conspicuous leisure," MPRA Paper 40809, University Library of Munich, Germany.
    2. 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.
    3. Peter Diamond, 1987. "Consumer Differences and Prices in a Search Model," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 429-436.
    4. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
    5. Mark Aguiar & Erik Hurst, 2007. "Measuring Trends in Leisure: The Allocation of Time Over Five Decades," The Quarterly Journal of Economics, Oxford University Press, vol. 122(3), pages 969-1006.
    6. 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, 2013. "Эффект Веблена, Предельная Полезность Денег И Денежная Иллюзия
      [Veblen effect, marginal utility of money, and money illusion]
      ," MPRA Paper 51014, University Library of Munich, Germany.
    6. Malakhov, Sergey, 2014. "Sunk costs of consumer search: economic rationality of satisficing decision," MPRA Paper 53493, University Library of Munich, Germany.
    7. 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

    money flexibility; consumption leisure choice; search; Veblen effect;

    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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