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.

[1]   Crafton, S.M. (1979) Convenience Store Pricing and the Value of Time: A Note on the Becker-Devany Full Price Model. Southern Economic Journal, 45, 1254-1260.

[2]   Gwartney, J.D., Stroup, R.L., Sobel, R.S. and Macpherson, D.A. (2003) Microeconomics: Private and Public Choice. 10th Edition, Thomson, Mason.

[3]   Ekelund, R.B. and Tollison, R.D. (1991) Microeconomics. 3rd Edition, HarperCollins, New York.

[4]   Santerre, R.E. and Neun, S.P. (2000) Health Economics: Theories, Insights, and Industry Studies. Rev. Edition, Dryden, Fort Worth.

[5]   Eaton, B.C. and Eaton, D.F. (1988) Microeconomics. W. H. Freeman, New York.

[6]   Becker, G.S. (1965) A Theory of the Allocation of Time. Economic Journal, 75, 493-517.