Abstract
The purpose of this paper is to develop a decision-making model for entrepreneurial activity, highlighting the problem of aspiring entrepreneurs’ income–leisure tradeoff, and to examine the relationship between the tradeoff and the entrepreneurial activity. First, we construct the model and determine the conditions for business start-up with or without liquidity constraints. Next, we present some of the important results of the model—for example, entrepreneurs without liquidity constraints reduce their capital investment and increase their leisure in proportion to their own assets, and entrepreneurs with liquidity constraints take more leisure than do entrepreneurs without liquidity constraints. Further, by plotting graphs and using numerical simulations, we validate these findings and obtain some additional information about the model and the nature of solutions.
