Noncooperative Household Consumption with Caring

41 Pages Posted: 6 Mar 2011 Last revised: 20 Apr 2011

See all articles by L. Cherchye

L. Cherchye

KU Leuven; Erasmus Research Institute of Management (ERIM)

Thomas Demuynck

Catholic University of Leuven (KUL) - Faculty of Business and Economics (FBE)

Bram De Rock

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

Multiple version iconThere are 3 versions of this paper

Date Written: March 2, 2011

Abstract

We present a household consumption model that accounts for caring household members, while allowing for noncooperative behavior in decisions on public goods. The intrahousehold consumption outcome critically depends on the degree of caring between the household members. By varying the degree of intrahousehold caring, the model encompasses a whole continuum of household consumption models that are situated between the fully cooperative model and the noncooperative model without caring. This feature is used to define a measure for the degree of cooperation within the household. We also establish a dual characterization of our noncooperative model with caring preferences: we show that the model is dually equivalent to a noncooperative model with non-caring preferences that is characterized by intrahousehold transfers. Finally, following a revealed preference approach, we derive testable implications of the model for empirical data. We demonstrate the practical usefulness of the model through an illustrative application.

Keywords: household consumption, caring preferences, intrahousehold

JEL Classification: D11, D12, D13, C14

Suggested Citation

Cherchye, Laurens and Demuynck, Thomas and De Rock, Bram, Noncooperative Household Consumption with Caring (March 2, 2011). CentER Discussion Paper No. 2011-019, Available at SSRN: https://ssrn.com/abstract=1774786 or http://dx.doi.org/10.2139/ssrn.1774786

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

Catholic University of Leuven (KUL) - Faculty of Business and Economics (FBE) ( email )

Naamsestraat 69
Leuven, B-3000
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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