Large, Infrequent Consumption in the Multi-Good Life Cycle Consumption Model

摘要

For a detailed empirical analysis of consumer behavior, one usually uses datasets containing information on the expenditures of households disaggregated into several commodity categories. Such datasets often contain one or more commodities which are either not bought at all or, if they are bought, it is in (relatively) large quantities only. Such expenditure patterns are usually explained from the difference between (frequent) consumption and (infrequent) purchase of a commodity. But there are cases, such as the vacation of households, in which an alternative explanation is worthwhile to take into consideration. In these situations, the fluctuating expenditure pattern corresponds to fluctuations in the underlying consumption behavior. The paper investigates how such a consumption pattern can be explained within a life cycle framework. As the multi-good version of the life cycle model under uncertainty cannot fully capture it, a modification is proposed. It amounts to a non-convex transformation of either the preferences or the budget set, which ensures that low consumption levels are never preferred by the consumers.