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

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