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Economics

Sergey Malakhov

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Full-Text Articles in Social and Behavioral Sciences

Law Of One Price And Optimal Consumption-Leisure Choice Under Price Dispersion, Sergey V. Malakhov Mar 2016

Law Of One Price And Optimal Consumption-Leisure Choice Under Price Dispersion, Sergey V. Malakhov

Sergey Malakhov

If the demand under price dispersion is formed by consumers with zero search costs and consumers with positive search costs, the law of one price holds at the equilibrium price level, where the lowest willingness to pay between consumers with zero search costs meets the willingness to accept or to sell of consumers with positive search costs. Consumers with positive search costs maximize their utility with respect to their optimal decisions when marginal losses in labor income during the search are equal to marginal savings on purchase. Optimal decisions move their willingness to accept to the equilibrium price level. Suboptimal …

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Propensity To Search: Common, Leisure, And Labor Models Of Consumer Behavior, Sergey V. Malakhov Jan 2015

Propensity To Search: Common, Leisure, And Labor Models Of Consumer Behavior, Sergey V. Malakhov

Sergey Malakhov

The analysis of the propensity to search specifies the “common” or the ordinary model of consumer behavior based on the synthesis of the neoclassical approach with satisficing concept, and “leisure” and “labor” models of behavior that represent different combinations of conspicuous consumption, leisure, and labor. While the “common model” of behavior demonstrates a moderate propensity to search, “leisure” and “labor” models of consumer behavior exhibit vigorous propensities to search that results in purchase of unnecessary items and therefore in overconsumption. This trend is also presented in home production where vigorous propensity to search takes the form of the vigorous propensity …

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Willingness To Overpay For Insurance And For Consumer Credit: Search And Risk Behavior Under Price Dispersion, Sergey V. Malakhov Sep 2014

Willingness To Overpay For Insurance And For Consumer Credit: Search And Risk Behavior Under Price Dispersion, Sergey V. Malakhov

Sergey Malakhov

When income growth under price dispersion reduces the time of search and raises prices of purchases, the increase in purchase price can be presented as the increase in the willingness to pay for insurance or the willingness to pay for consumer credit. The optimal consumer decision represents the trade-off between the propensity to search for beneficial insurance or consumer credit, and marginal savings on insurance policy or consumer credit. Under price dispersion the indirect utility function takes the form of cubic parabola, where the risk aversion behavior ends at the saddle point of the comprehensive insurance or the complete consumer …

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Slutsky Equation And Negative Elasticity Of Labor Supply: Behavioral Bias Or Optimal Consumption-Leisure Choice?, Sergey V. Malakhov Jul 2014

Slutsky Equation And Negative Elasticity Of Labor Supply: Behavioral Bias Or Optimal Consumption-Leisure Choice?, Sergey V. Malakhov

Sergey Malakhov

One of the applications of the prospect theory is the behavioral phenomenon of the negative elasticity of the individual labor supply. This working paper argues that the negative elasticity of labor supply can be understood better with the help of the interpretation of the Slutsky equation with regard to the common consumption-leisure choice.

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Sunk Costs Of Consumer Search: Economic Rationality Of Satisficing Decision., Sergey V. Malakhov Jul 2014

Sunk Costs Of Consumer Search: Economic Rationality Of Satisficing Decision., Sergey V. Malakhov

Sergey Malakhov

The paper argues that sunk costs’ sensitivity can lead to the optimal consumption-leisure choice under price dispersion. The increase in quantity to be purchased with the extension of the time horizon of the consumption-leisure choice equalizes marginal costs of search with its marginal benefits. The implicit optimal choice results in the explicit satisficing decision. The transformation of cognitive mechanism of discouragement into satisficing happens only in the “common model” of consumer behavior. The paper argues that the cognitive mechanism of aspiration takes place when consumers try to get marginal savings on purchase greater than the wage rate and, therefore, they …

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Satisficing Decision Procedure And Optimal Consumption-Leisure Choice, Sergey V. Malakhov Jun 2014

Satisficing Decision Procedure And Optimal Consumption-Leisure Choice, Sergey V. Malakhov

Sergey Malakhov

The paper argues that a satisficing consumer decision equalizes marginal costs of search for satisficing price with the marginal benefit of search where the marginal costs of search are equal to the marginal loss in labor income and the marginal benefit of search is equal to the marginal savings on purchase. When the liquidity constraint is soft, a consumer maximizes the utility of his consumption-leisure choice with regard to the equality of marginal values of search. Therefore, the satisficing decision becomes optimal. And the equilibrium price of the satisficing optimal choice becomes equal to the willingness to accept.

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Equazione Di Slutsky “Nelle Loro Mani”: Il Centenario “Sulla Teoria Del Bilancio Del Consumatore”, Sergey V. Malakhov Apr 2014

Equazione Di Slutsky “Nelle Loro Mani”: Il Centenario “Sulla Teoria Del Bilancio Del Consumatore”, Sergey V. Malakhov

Sergey Malakhov

The paper presents the illustrative classroom application of the Slutsky equation to the consumption-leisure choice.

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A Note On The Synthesis Of The Satisficing Concept And The Neoclassical Theory, Sergey V. Malakhov Nov 2013

A Note On The Synthesis Of The Satisficing Concept And The Neoclassical Theory, Sergey V. Malakhov

Sergey Malakhov

The development of the neoclassical theory of search bridges the gap between the assumption of the maximizing consumer behavior and the satisficing decision procedure. The paper argues that the consumer satisficing decision procedure results in the equality of the marginal costs of search with its marginal benefit.

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Money Flexibility And Optimal Consumption-Leisure Choice Under Price Dispersion, Sergey V. Malakhov Mar 2013

Money Flexibility And Optimal Consumption-Leisure Choice Under Price Dispersion, Sergey V. Malakhov

Sergey Malakhov

The synthesis of G.Sigler’s rule of the optimal search with the classical individual labor supply model can incorporate the satisficing decision procedure in the neoclassical framework. Many psychological anomalies and puzzles like the paradox of little pre-purchase search for big-ticket items and the effect of sunk costs sensitivity get the purely economic rationale. This synthesis also enlarges the understanding of the phenomenon of money flexibility under price dispersion. The specific constraints of the search model establish the correspondence between elasticity of the marginal utility of labor income with regard to price dispersion, wage rates, and the propensity to search. The …

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Veblen Effect, Search For Status Goods, And Negative Utility Of Conspicuous Leisure., Sergey V. Malakhov Sep 2012

Veblen Effect, Search For Status Goods, And Negative Utility Of Conspicuous Leisure., Sergey V. Malakhov

Sergey Malakhov

When expected savings on purchases are greater than the wage rate, the optimal search results in the negative marginal utility of leisure. The search transforms the classical backward bending effect and the leisure becomes complementary to the search. Consumers compensate “bad” leisure by status goods of exceptional quality on markets with high price dispersion. Status consumption complements “bad” conspicuous leisure and produces the Veblen effect as well as the “gardening aboard the boat” effect.

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A Paradox Of Little Pre-Purchase Search For Durables: The Trade-Off Between Prices, Product Lifecycle, And Savings On Purchases, Sergey V. Malakhov Apr 2012

A Paradox Of Little Pre-Purchase Search For Durables: The Trade-Off Between Prices, Product Lifecycle, And Savings On Purchases, Sergey V. Malakhov

Sergey Malakhov

The paper describes the microeconomic trade-off between prices, savings on purchases, and the time horizon of the consumption-leisure choice during the search for different products. When marginal costs of the search are equal to its marginal benefit, the time of search is proportional to products’ lifecycles and it is inversely proportional to willingness to pay.

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Optimal Sequential Search And Optimal Consumption-Leisure Choice, Sergey Malakhov Sep 2011

Optimal Sequential Search And Optimal Consumption-Leisure Choice, Sergey Malakhov

Sergey Malakhov

This paper describes the static model of consumption-leisure choice in which both the maximization of utility and the maximization of precautionary savings for sequential purchases are constrained by the equality of the marginal costs of search to their marginal benefits. The marginal rate of substitution of leisure for consumption appears in the specific form, which updates the Cobb-Douglas utility function and provides search behavior with the optimal stopping rule. This rule bridges the gap between the neoclassical explanation of search behavior and the search-satisficing concept. The original arrangements of polar models of behavior, the overconsumption effect, the Veblen effect, and …

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