Abstract
It is the aim of this chapter to provide the microeconomic fundamentals necessary to set up a realistic model of consumer behavior that could form the basis of an empirical analysis. Particular attention is paid to the factors explaining individual heterogeneity and the substitutability of goods. Gradually resolving the most stringent assumptions of the standard neoclassical model of consumer demand, models are surveyed that allow for multiple “representative consumers”, socioeconomic characteristics other than income, heterogeneous goods, or product differentiation.
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References
Cf. Malinvaud (1972).
Cf. Debreu (1959).
Cf. Deaton (1979).
Homothetic preferences are represented by linear homogeneous direct utility functions.
The discounted value of the utility function in a given period is equivalent to the subutility or felicity function for the respective period. Cf. Deaton (1992).
Bellman’s principle of optimality (Bellman, 1957) states that optimality of consumption over time implies optimality of consumption for each period of time.
Cf. Becker (1965, 1975) or Becker and Michael (1973). Cf. also Gronau (1973, 1976, 1977). The term “household production” is slightly misleading, as the basic model refers to individuals rather than households. Extensions to larger decision-making units are clearly possible, however.
Becker (1965, p. 496).
This assumption implies that the purchase of market goods takes zero time. Alternatively, a fixed relation between the consumption of market goods and time could be established, assuming firstly a limitational production function and secondly time-intensive consumption of market goods. Cf. e.g. Zimmermann (1985).
For a detailed description of joint production in household production models cf. Zimmermann (1985).
Cf. Lancaster (1966, p. 139).
Cf. Lancaster (1971).
Lancaster (1966, 1971) claims that only major price changes affect the efficiency frontier, which is not necessarily correct. Infinitesimal price changes may induce the exclusion of inefficient goods if the angle between the two intersecting facets is close enough to 180°.
Cf. Lancaster (1991).
In fact, Lancaster does consider factors like “human capital”, although not explicitly, when analyzing the effects of advertisements on the individual’s perception of qualities for instance. Cf. Lancaster (1977).
It should be noted that the extended version of the household production model in the life cycle by Becker and Lewis (1973) does consider a measurable quality of the respective commodity (children). It remains doubtful, however, how the quality of children could be quantified in reality.
The presentation of the Kuhn-Tucker conditions follows Lee and Pitt (1986). It deviates from the (standard) presentation chosen e.g. by Chiang (1984, pp. 722–724).
For the concept of virtual prices (or, equivalently, shadow prices) cf. Neary and Roberts (1980).
For a survey of models describing the firms’ choice of the production locations cf. Beckmann and Thisse (1986).
Rarely will goods, although being tradable, be delivered to the consumers’ doorstep. Goods are typically offered at distinct locations instead, which are at relatively close distance to each other (retailers, shopping centers, physicians, etc.). In reality, transportation costs thus arise for the consumers who “shop around” and collect diverse goods at diverse locations. As these transportation costs can be assumed to be fairly minor, however, they will be henceforth neglected to simplify the presentation.
Cf. Boehm, Herzog, and Schlottmann (1991) or Zax (1994).
Cf. Alonso (1964), Muth (1969), or Straszheim (1987).
Cf. Becker (1965).
Cf. Clark and Hunter (1992) or Boehm, Herzog, and Schlottmann (1991).
Cf. Harris and Todaro (1970).
Cf. Hausman (1985).
Cf. also Ott (1992).
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© 1995 Physica-Verlag Heidelberg
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Eymann, A. (1995). Microeconomic Essentials. In: Consumers’ Spatial Choice Behavior. International Economics and Institutions. Physica-Verlag HD. https://doi.org/10.1007/978-3-642-50325-2_2
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DOI: https://doi.org/10.1007/978-3-642-50325-2_2
Publisher Name: Physica-Verlag HD
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