The complexity of the consumer problem

Itzhak Gilboa; Andrew Postlewaite; David Schmeidler

doi:10.1016/j.rie.2021.01.001

The complexity of the consumer problem

Itzhak Gilboa^*, Andrew Postlewaite, David Schmeidler

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

Abstract

A literal interpretation of neo-classical consumer theory suggests that the consumer solves a very complex problem. In the presence of indivisible goods, the consumer problem is NP-Hard, and it appears unlikely that it can be optimally solved by a human. Two implications of this observation are that (i) households may imitate each other's choices; (ii) households may adopt heuristics that give rise to the phenomenon of mental accounting.

Original language	English
Pages (from-to)	96-103
Number of pages	8
Journal	Research in Economics
Volume	75
Issue number	1
DOIs	https://doi.org/10.1016/j.rie.2021.01.001
State	Published - Mar 2021

Keywords

Computational complexity
Consumer theory
Mental accounting

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10.1016/j.rie.2021.01.001

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The complexity of the consumer problem

Abstract

Keywords

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