JOURNAL ARTICLE
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Decision Costs and Microeconomic Demand For Money
Journal of Contextual Economics – Schmollers Jahrbuch, Vol. 107 (1987), Iss. 3 : pp. 361–378
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Gottinger, Hans W.
Abstract
This paper presents a complex optimization problem in the household's demand for money taking computation costs into account. The production of a decision is considered an investment and an agent will not plan to replace an old decision until the expected value of a new decision exceeds its expected cost. It is assumed that the household determines the appropriate time to make a new decision according to the level of its money balances. A major result of the model is that the expected time interval between revisions of the household's decisions is one of the variables determining the demand for money.