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Transferable utility and demand functions

Author

Listed:
  • Chiappori, Pierre-André

    (Department of Economics, Columbia University)

  • Gugl, Elisabeth

    (Department of Economics, University of Victoria)

Abstract

While many theoretical works, particularly in Family Economics, rely on the Transferable Utility (TU) assumption, its exact implications in terms of individual preferences have never been fully worked out. In this paper, we provide a set of necessary and sufficient conditions for a group to satisfy the TU property. We express these conditions in terms of both individual indirect utilities and individual demand functions. Lastly, we describe the link between this question and a standard problem in consumer theory (initially raised by Gorman 1953), and explain why a similar characterization in terms of direct utilities cannot obtain.

Suggested Citation

  • Chiappori, Pierre-André & Gugl, Elisabeth, 2020. "Transferable utility and demand functions," Theoretical Economics, Econometric Society, vol. 15(4), November.
    • Handle: RePEc:the:publsh:3715
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    References listed on IDEAS

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    12. Blackorby, Charles & Boyce, Richard & Russell, R Robert, 1978. "Estimation of Demand Systems Generated by the Gorman Polar Form: A Generalization of the S-Branch Utility Tree," Econometrica, Econometric Society, vol. 46(2), pages 345-363, March.
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    Cited by:

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    2. Laurens Cherchye & Thomas Demuynck & Bram De Rock & Frederic Vermeulen, 2017. "Household Consumption When the Marriage Is Stable," American Economic Review, American Economic Association, vol. 107(6), pages 1507-1534, June.
    3. Demuynck, Thomas & Potoms, Tom, 2020. "Weakening transferable utility: The case of non-intersecting Pareto curves," Journal of Economic Theory, Elsevier, vol. 188(C).
    4. Michael Greinecker & Christopher Kah, 2018. "Pairwise stable matching in large economies," Graz Economics Papers 2018-01, University of Graz, Department of Economics.
    5. Martin Browning & Laurens Cherchye & Thomas Demuynck & Bram De Rock & Frederic Vermeulen, 2021. "Stable marriage, household consumption and unobserved match quality," Working Papers of Department of Economics, Leuven 679647, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    6. Pierre-André Chiappori & Bernard Salanié, 2021. "Mating Markets," Working Papers 2021-016, Human Capital and Economic Opportunity Working Group.
    7. Michael Greinecker & Christopher Kah, 2018. "Pairwise stable matching in large economies," Working Papers 2018-02, Faculty of Economics and Statistics, Universität Innsbruck.
    8. Michael Greinecker & Christopher Kah, 2021. "Pairwise Stable Matching in Large Economies," Econometrica, Econometric Society, vol. 89(6), pages 2929-2974, November.

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    More about this item

    Keywords

    Transferable utility; matching; Gorman polar form;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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