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 …
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.
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 …
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.
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.
