When Inefficiency Begets Efficiency

38 Pages Posted: 3 Jun 2004

See all articles by Hans Gersbach

Hans Gersbach

ETH Zurich - CER-ETH -Center of Economic Reseaarch; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Hans H. Haller

Virginia Polytechnic Institute & State University - Department of Economics

Date Written: May 2004

Abstract

Collective consumption decisions taken by the members of a household may prove inefficient. The impact on market performance depends on whether household inefficiencies are caused by inefficient net trades with the market or by inefficient distribution of resources within households. Inefficient internal distribution always results in inefficient equilibrium allocations. This leads us to consider competitive forces as a disciplinary device for households. Competition of households for both resources and members can eliminate or reduce inefficient internal distribution.

JEL Classification: D7, D5

Suggested Citation

Gersbach, Hans and Haller, Hans H., When Inefficiency Begets Efficiency (May 2004). CESifo Working Paper No. 1197. Available at SSRN: https://ssrn.com/abstract=554503

Hans Gersbach (Contact Author)

ETH Zurich - CER-ETH -Center of Economic Reseaarch ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland
+41 44 632 82 80 (Phone)
+41 44 632 18 30 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Hans H. Haller

Virginia Polytechnic Institute & State University - Department of Economics ( email )

3021 Pamplin Hall
Blacksburg, VA 24061
United States
540-231-7591 (Phone)
540-231-5097 (Fax)

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