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IN SEARCH OF THE BEST BUNDLE: HILL‐CLIMBING CONSUMERS AND THE MICRODYNAMICS OF CONSUMER CHOICE
Author(s) -
KUHN PETER
Publication year - 1996
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/j.1468-0106.1996.tb00185.x
Subject(s) - economics , incentive , microeconomics , climbing , bundle , hill climbing , consumer choice , durable good , computer science , materials science , archaeology , algorithm , composite material , history
. The paper considers the consequences of hill‐climbing consumer behavior in the presence of nonconvex utility, and considers the optimal reactions of nonmyopic firms and governments to such behavior. Both firms and governments have an incentive to induce consumers to start consuming goods subject to nonconvexities by offering introductory price discounts. Monopolists appear to offer smaller introductory discounts than is optimal; competitive markets may never be able to supply such goods at all.