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Title:An Afriat theorem for the collective model of household consumption PDF Logo
Authors:Cherchye, Laurens
De Rock, Bram
Vermeulen, Frederic
Issue Date:2008
Series/Report no.:IZA discussion papers 3794
Abstract:We provide a nonparametric 'revealed preference' characterization of rational household behavior in terms of the collective consumption model, while accounting for general (possibly non-convex) individual preferences. We establish a Collective Axiom of Revealed Preference (CARP), which provides a necessary and sufficient condition for data consistency with collective rationality. Our main result takes the form of a 'collective' version of the Afriat Theorem for rational behavior in terms of the unitary model. This theorem has some interesting implications. With only a finite set of observations, the nature of consumption externalities (positive or negative) in the intra-household allocation process is non-testable. The same non-testability conclusion holds for privateness (with or without externalities) or publicness of consumption. By contrast, concavity of individual utility functions (representing convex preferences) turns out to be testable. In addition, monotonicity is testable for the model that assumes all household consumption is public.
Subjects:Collective model
consumption
Pareto efficiency
revealed preferences
Afriat theorem
Collective Axiom of Revealed Preferences
JEL:D11
Persistent Identifier of the first edition:urn:nbn:de:101:1-20081126681
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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