TITLE:
The Cost and Benefit of Consuming in Smaller Bundles
AUTHORS:
Ben David Nissim, Benzion Uri
KEYWORDS:
Consumption, Bundles
JOURNAL NAME:
Theoretical Economics Letters,
Vol.5 No.5,
September
28,
2015
ABSTRACT: Existing classical
theory cannot explain consumer behavior of cutting consumption into smaller
bundles instead of consuming everything in one bundle. We present a model that
separates consumer behavior into two steps. At first, the consumer decides on
the amount of working hours, which defines his income. In the second step, s/he
decides on the number of consumption bundles. Since a consumer has larger
utility when cutting consumption into smaller bundles, while on the other hand
s/he faces higher costs when buying smaller bundles, s/he can take both factors
into consideration when deciding on the optimal number of consumption bundles.