Money flexibility and optimal consumption-leisure choice under price dispersion
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.
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- Peter Diamond, 1985.
"Consumer Differences and Prices in a Search Model,"
404, Massachusetts Institute of Technology (MIT), Department of Economics.
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- Mark Aguiar & Erik Hurst, 2006. "Measuring trends in leisure: the allocation of time over five decades," Working Papers 06-2, Federal Reserve Bank of Boston.
- Sergey Malakhov, 2014.
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Macrothink Institute, vol. 2(2), pages 138-151, September.
- Malakhov, Sergey, 2012. "Satisficing decision procedure and optimal consumption-leisure choice," MPRA Paper 38964, University Library of Munich, Germany.
- Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
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