Noncooperative Household Consumption with Caring

54 Pages Posted: 25 Nov 2015

See all articles by L. Cherchye

L. Cherchye

KU Leuven; Erasmus Research Institute of Management (ERIM)

Sam Cosaert

Luxembourg Institute of Socio-Economic Research (LISER)

Thomas Demuynck

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

Bram de Rock

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

Multiple version iconThere are 3 versions of this paper

Date Written: November 2015

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 show the practical usefulness of our model by an application to panel data on two-person household consumption drawn from the Russia Longitudinal Monitoring Survey. We find that the degree of cooperation varies considerably across couples. We relate this variation to observable household characteristics, and find that older couples are generally more cooperative.

Keywords: household consumption, caring preferences, intrahousehold cooperation, Nash equilibrium, revealed preferences

JEL Classification: D11, D12, D13, C14

Suggested Citation

Cherchye, Laurens and Cosaert, Sam and Demuynck, Thomas and de Rock, Bram, Noncooperative Household Consumption with Caring (November 2015). Available at SSRN: https://ssrn.com/abstract=2694972 or http://dx.doi.org/10.2139/ssrn.2694972

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

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

Thomas Demuynck

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

Naamsestraat 69
Leuven, B-3000
Belgium

Bram De Rock

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

Etienne Sabbelaan 53
Kortrijk, B-8500
Belgium

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