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Lifetime Utility Maximization When the Consumer's Lifetime Depends on his Consumption

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  • W. R. HUGHES

Abstract

A model of consumer behaviour is postulated whereby expected lifetime is an argument of the consumer's utility function and the consumption pattern chosen by the consumer affects his subjective probability distribution over expected, lifetime. Although introducing uncertainty makes the derivation of general conclusions difficult, it is shown for a simple two‐good case that there are significant implications for income and substitution effects and the shape of the consumer's demand curve.

Suggested Citation

  • W. R. Hughes, 1978. "Lifetime Utility Maximization When the Consumer's Lifetime Depends on his Consumption," The Economic Record, The Economic Society of Australia, vol. 54(1), pages 65-71, April.
    • Handle: RePEc:bla:ecorec:v:54:y:1978:i:1:p:65-71
    DOI: 10.1111/j.1475-4932.1978.tb00316.x
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    References listed on IDEAS

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    1. A. Sandmo, 1970. "The Effect of Uncertainty on Saving Decisions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 37(3), pages 353-360.
    2. Epstein, L, 1975. "A Disaggregate Analysis of Consumer Choice under Uncertainty," Econometrica, Econometric Society, vol. 43(5-6), pages 877-892, Sept.-Nov.
    3. Hayne E. Leland, 1968. "Saving and Uncertainty: The Precautionary Demand for Saving," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 82(3), pages 465-473.
    4. Dreze, Jacques H. & Modigliani, Franco, 1972. "Consumption decisions under uncertainty," Journal of Economic Theory, Elsevier, vol. 5(3), pages 308-335, December.
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