Heuristics as Decision Rules
Year: 2005
Type: book
Abstract: Many consumption prices are highly volatile. It would certainly overburden our cognitive system to fully adjust to all these changes. Households therefore often rely on simple heuristics when deciding what to consume, e.g. in the form of a constant budget share for a specific consumption commodity, like a vacation, or of a constant consumption amount for lowcost commodities as food items. Using utility functions we can measure the welfare loss, caused by such heuristics, and to what extent this can be reduced by adaptation. In the present Part I the analysis is mainly restricted to a single consumer with a Cobb-Douglas utility function. General utility functions will also be considered. Part II will study exchange economies.
DOI: 10.18452/3463
Authors: Güth, Werner, Neuefeind, Wilhelm
Language: English
Subfield: General Decision Sciences
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2732270934