The Cost and Benefit of Consuming in Smaller Bundles ()
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.
Share and Cite:
Nissim, B. and Uri, B. (2015) The Cost and Benefit of Consuming in Smaller Bundles.
Theoretical Economics Letters,
5, 599-605. doi:
10.4236/tel.2015.55070.
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