The Revealed Preference Approach to Collective Consumption Behavior: Nonparametric Testing and Sharing Rule Recovery

Abstract

We present a nonparametric revealed preference methodology for empirically analyzing collective consumption behavior. First, we introduce an integer programming (IP) methodology for testing data consistency with collective consumption models that account for publicly as well as privately consumed goods.

This IP methodology can include information on assignable quantities.for private goods. Next, we show that the IP methodology allows for recovering the personalized (Lindahl) prices for the public goods and the personalized quantities for the private goods. In turn, this implies recovery of the sharing rule (i.e. personalized income share levels). Numerical examples and an empirical application demonstrate the practical usefulness of the methodology.

Keywords: collective model, revealed preferences, data consistency tests, recovery, integer programming, sharing rule

JEL Classification: D11, D12, D13, C14