Degrees of Cooperation in Household Consumption Models: A Revealed Preference Analysis

L.J.H. Cherchye, T. Demuynck, B. de Rock

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Abstract

We develop a revealed preference approach to analyze non-unitary con- sumption models with intrahousehold allocations deviating from the cooper- ative (or Pareto e¢ cient) solution. At a theoretical level, we establish re- vealed preference conditions of household consumption models with varying degrees of cooperation. Using these conditions, we show independence (or non-nestedness) of the di¤erent (cooperative-noncooperative) models. At a practical level, we show that our characterization implies testable conditions for a whole spectrum of cooperative-noncooperative models that can be verified by means of mixed integer programming (MIP) methods. This MIP formula- tion is particularly attractive in view of empirical analysis. An application to data drawn from the Russia Longitudinal Monitoring Survey (RLMS) demon- strates the empirical relevance of consumption models that account for limited intrahousehold cooperation.
Original languageEnglish
Place of PublicationTilburg
PublisherEconometrics
Number of pages38
Volume2009-91
Publication statusPublished - 2009

Publication series

NameCentER Discussion Paper
Volume2009-91

Keywords

  • household consumption
  • intrahousehold cooperation
  • revealed preferences
  • Generalized Axiom of Revealed Preference (GARP)
  • mixed in- teger programming (MIP).

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    Cherchye, L. J. H., Demuynck, T., & de Rock, B. (2009). Degrees of Cooperation in Household Consumption Models: A Revealed Preference Analysis. (CentER Discussion Paper; Vol. 2009-91). Econometrics.