Degrees of Cooperation in Household Consumption Models: A Revealed Preference Analysis

37 Pages Posted: 6 Jan 2010

See all articles by L. Cherchye

L. Cherchye

KU Leuven; Erasmus Research Institute of Management (ERIM)

Thomas Demuynck

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES)

Bram De Rock

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2009

Abstract

We develop a revealed preference approach to analyze non-unitary consumption models with intrahousehold allocations deviating from the cooperative (or Pareto efficient) solution. At a theoretical level, we establish revealed preference conditions of household consumption models with varying degrees of cooperation. Using these conditions, we show independence (or non-nestedness) of the different (cooperative-noncooperative) models. At a practical level, we show that our characterization implies testable conditions for a whole spectrum of cooperative-noncooperative models that can be verified by means of mixed integer programming (MIP) methods. This MIP formulation is particularly attractive in view of empirical analysis. An application to data drawn from the Russia Longitudinal Monitoring Survey (RLMS) demonstrates the empirical relevance of consumption models that account for limited intrahousehold cooperation.

Keywords: household consumption, intrahousehold cooperation, revealed preferences, Generalized Axiom of Revealed Preference (GARP), mixed integer programming (MIP)

JEL Classification: D11, D12, D13, C14

Suggested Citation

Cherchye, Laurens and Demuynck, Thomas and De Rock, Bram, Degrees of Cooperation in Household Consumption Models: A Revealed Preference Analysis (November 2009). Available at SSRN: https://ssrn.com/abstract=1531585 or http://dx.doi.org/10.2139/ssrn.1531585

Laurens Cherchye (Contact Author)

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant
Belgium

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Thomas Demuynck

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium

Bram De Rock

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Av. F. D. Roosevelt, 50
CP 114
Brussels, B-1050
Belgium

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