Measuring the Willingness-to-Pay for Others' Consumption: An Application to Joint Decisions of Children

KU Leuven Discussion Paper Series DPS14.22

27 Pages Posted: 14 Oct 2014

See all articles by Sabrina Bruyneel

Sabrina Bruyneel

KU Leuven - Faculty of Business and Economics (FEB)

L. Cherchye

KU Leuven; Erasmus Research Institute of Management (ERIM)

Sam Cosaert

Luxembourg Institute of Socio-Economic Research (LISER)

Bram de Rock

Katholieke Universiteit Leuven - Campus Kortrijk (KULAK) - Subfaculty of Economics and Applied Economics

Siegfried Dewitte

KU Leuven - Faculty of Business and Economics (FEB)

Date Written: July 29, 2014

Abstract

We propose a method to quantify the willingness-to-pay for the consumption of others in group decisions. Our method is based on revealed preference theory. It measures willingness-to-pay for others' consumption by evaluating positive consumption externalities in monetary terms. Within the framework of cooperative (i.e. Pareto efficient) consumption behavior, we introduce a selfishness parameter that defines a continuum of models that are characterized by varying degrees of consumption externalities. We use our method to analyze decisions made by dyads of children in an experimental consumption setting. We find that children's consumption decisions are systematically characterized by externalities (i.e. non-selfish). But we also observe that there is substantial heterogeneity across children, which we can relate to differences in age, gender and degree of friendship between dyad members.

Keywords: consumption externalities, selfishness, revealed preferences, children's consumption

JEL Classification: D11, D12, C14

Suggested Citation

Bruyneel, Sabrina and Cherchye, Laurens and Cosaert, Sam and de Rock, Bram and Dewitte, Siegfried, Measuring the Willingness-to-Pay for Others' Consumption: An Application to Joint Decisions of Children (July 29, 2014). KU Leuven Discussion Paper Series DPS14.22, Available at SSRN: https://ssrn.com/abstract=2509269 or http://dx.doi.org/10.2139/ssrn.2509269

Sabrina Bruyneel (Contact Author)

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Laurens Cherchye

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant
Belgium

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Sam Cosaert

Luxembourg Institute of Socio-Economic Research (LISER) ( email )

11, Porte des Sciences
Campus Belval – Maison des Sciences Humaines
Esch-sur-Alzette, L-4366
Luxembourg

Bram De Rock

Katholieke Universiteit Leuven - Campus Kortrijk (KULAK) - Subfaculty of Economics and Applied Economics ( email )

Etienne Sabbelaan 53
Kortrijk, B-8500
Belgium

Siegfried Dewitte

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

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