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 TEL  Vol.5 No.5 , October 2015
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.
Keywords: Consumption, Bundles
Cite this paper: 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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