Bargaining Power and Equilibrium Consumption
38 Pages Posted: 25 Apr 2005
Date Written: April 2005
We examine how a shift of bargaining power within households operating in a competitive market environment affects equilibrium allocation and welfare. If price effects are sufficiently small, then typically an individual benefits from an increase of bargaining power, necessarily to the detriment of others. If price effects are drastic the welfare of all household members moves in the same direction when bargaining power shifts, at the expense (or for the benefit) of outside consumers. Typically a shift of bargaining power within a set of households also impacts upon other households. We show that each individual of a sociological group tends to benefit if he can increase his bargaining power, but suffers if others in his group do the same.
Keywords: household behavior, bargaining power, local and global changes, price effects, general equilibrium
JEL Classification: D10, D50, D62, D70
Suggested Citation: Suggested Citation