One of the applications of the prospect theory is the behavioral phenomenon of the negative elasticity of the individual labor supply. This paper argues that the negative elasticity of labor supply can be understood better with the help of the interpretation of the Slutsky equation with regard...

One of the applications of the prospect theory is the behavioral phenomenon of the negative elasticity of the individual labor supply. This working paper argues that the negative elasticity of labor supply can be understood better with the help of the interpretation of the Slutsky equation with...

In the present paper an analysis of the neo-classical optimization model with linear constraints is proposed. By introducing the dual problem it is shown that the solution to the maximization problem is also a solution to the minimization problem. The purely theoretical model proposes a...

In the present paper an analysis of the neo-classical optimization model with linear constraints is proposed. By introducing the dual problem it is shown that the solution to the maximization problem is also a solution to the minimization problem. The purely theoretical model proposes a...

The paper argues that sunk costs’ sensitivity can lead to the optimal consumption-leisure choice under price dispersion. The increase in quantity to be purchased with the extension of the time horizon of the consumption-leisure choice equalizes marginal costs of search with its marginal...

The paper discovers microeconomic mechanism of Veblen effect as well as of Giffen case as results of the negative marginal utility of money. The marginal utility of consumption also becomes negative. The total consumption-leisure utility is increased due to the increase in leisure time. This...

The analysis of the propensity to search specifies the “common” or the ordinary model of consumer behavior based on the synthesis of the neoclassical approach with satisficing concept and “leisure” and “labor” models of behavior that represent different combinations of conspicuous...

The analysis of the propensity to search under price dispersion discovers the identity of the optimal consumption-leisure choices in the model of optimal search and in the classical model of individual labor supply when the propensity to search is unimportant. However, the vigorous propensity to...

People are sometimes risk-averse in gains but risk-loving in losses. Such behavior and other anomalies underlying prospect theory arise from a model of local status maximization in which consumers compare their wealth with other consumers of similar wealth. This social explanation shares key...