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The Revealed Prefernce Approach to Collective Consumption Behavior: Testing, Recovery, and Welfare Analysis

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Author Info
Cherchye, L.
Rock, B. de
Vermeulen, F.M.P. (Tilburg University, Center for Economic Research)

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Abstract

We extend the nonparametric 'revealed preference' methodology for analyzing collective consumption behavior (with consumption externalities and public consumption), to ren- der it useful for empirical applications that deal with welfare-related questions. First, we provide a nonparametric necessary and su? cient condition for collectively rational group behavior that incorporates the possibility of assignable quantity information. This charac- terizes collective rationality in terms of feasible personalized prices, personalized quantities and income shares (representing the underlying sharing rule). Subsequently, we present nonparametric testing tools for data consistency with special cases of the collective model, which impose specific structure on the preferences of the group members (in terms of con- sumption externalities and public consumption); and we show that these testing tools in turn allow for nonparametrically recovering (bounds on) feasible personalized prices, per- sonalized quantities and income shares that underlie observed (collectively rational) group behavior. In addition, we present formally similar testing and recovery tools for the general collective consumption model, which imposes minimal a priori structure. Interestingly, the proposed testing and recovery methodology can be implemented through integer program- ming (IP and MILP), which is attractive for practical applications. Finally, while we argue that assignable quantity information generally entails more powerful recovery results, we also demonstrate that precise nonparametric recovery (i.e. tight bounds) can be obtained even if no assignable quantity information is available.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2007-73.

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Date of creation: 2007
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Handle: RePEc:dgr:kubcen:200773

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Find related papers by JEL classification:
D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Richard Blundell & Jean-Marc Robin, 2000. "Latent Separability: Grouping Goods without Weak Separability," Econometrica, Econometric Society, vol. 68(1), pages 53-84, January.
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  2. Chiappori, Pierre-Andre, 1992. "Collective Labor Supply and Welfare," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 437-67, June. [Downloadable!] (restricted)
    Other versions:
  3. Pierre-Carl Michaud & Frederic Vermeulen, 2006. "A Collective Labor Supply Model: Identification and Estimation in the Presence of Externalities by Means of Panel Data," Working Papers 406, RAND Corporation Publications Department. [Downloadable!]
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  5. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-73, July. [Downloadable!] (restricted)
  6. Martin Browning & Pierre-AndrŽe Chiappori & Arthur Lewbel, 2004. "Estimating Consumption Economies of Scale, Adult Equivalence Scales, and Household Bargaining Power," Boston College Working Papers in Economics 588, Boston College Department of Economics, revised 04 Sep 2006. [Downloadable!]
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  7. Varian, Hal R., 1990. "Goodness-of-fit in optimizing models," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 125-140. [Downloadable!] (restricted)
  8. Arthur Lewbel & Krishna Pendakur, 2008. "Estimation of Collective Household Models With Engel Curves," Boston College Working Papers in Economics 694, Boston College Department of Economics. [Downloadable!]
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  9. Browning, Martin & Francois Bourguignon & Pierre-Andre Chiappori & Valerie Lechene, 1994. "Income and Outcomes: A Structural Model of Intrahousehold Allocation," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1067-96, December. [Downloadable!] (restricted)
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  10. FRANÇOIS BOURGUIGNON & MARTIN BROWNING & PIERRE-ANDRÉ CHIAPPORI, 2009. "Efficient Intra-Household Allocations and Distribution Factors: Implications and Identification," Review of Economic Studies, Blackwell Publishing, vol. 76(2), pages 503-528, 04. [Downloadable!] (restricted)
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  11. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2007. "The Collective Model of Household Consumption: A Nonparametric Characterization," Econometrica, Econometric Society, vol. 75(2), pages 553-574, 03. [Downloadable!] (restricted)
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  12. Victor Chernozhukov & Han Hong & Elie Tamer, 2007. "Estimation and Confidence Regions for Parameter Sets in Econometric Models," Econometrica, Econometric Society, vol. 75(5), pages 1243-1284, 09. [Downloadable!] (restricted)
  13. Donald J. Brown & Chris Shannon, 2000. "Uniqueness, Stability, and Comparative Statics in Rationalizable Walrasian Markets," Econometrica, Econometric Society, vol. 68(6), pages 1529-1540, November.
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  14. Richard Blundell & Martin Browning & Ian Crawford, 1998. "Nonparametric Engel Curves and Revealed Preference," Discussion Papers 99-07, University of Copenhagen. Department of Economics. [Downloadable!]
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  15. James Andreoni & William T. Harbaugh, 2006. "Power Indices for Revealed Preference Tests," Levine's Bibliography 122247000000001257, UCLA Department of Economics. [Downloadable!]
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  16. Blow, Laura & Crawford, Ian, 2001. "The Cost of Living with the RPI: Substitution Bias in the UK Retail Prices Index," Economic Journal, Royal Economic Society, vol. 111(472), pages F357-82, June. [Downloadable!] (restricted)
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  18. Richard Blundell & Pierre-André Chiappori & Costas Meghir, 2005. "Collective Labor Supply with Children," Journal of Political Economy, University of Chicago Press, vol. 113(6), pages 1277-1306, December. [Downloadable!] (restricted)
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  19. Martin Browning & P.A. Chiappori, 1996. "Efficient Intra-Household Allocations - A General Characterization and Empirical Tests," Discussion Papers 96-10, University of Copenhagen. Department of Economics.
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  20. Chiappori, P.A. & Ekeland, I., 2006. "The micro economics of group behavior: General characterization," Journal of Economic Theory, Elsevier, vol. 130(1), pages 1-26, September. [Downloadable!] (restricted)
  21. Brown, Donald J & Matzkin, Rosa L, 1996. "Testable Restrictions on the Equilibrium Manifold," Econometrica, Econometric Society, vol. 64(6), pages 1249-62, November. [Downloadable!] (restricted)
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  22. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Cherchye, Laurens & De Rock, Bram & Vermeulen, Frederic, 2008. "An Afriat Theorem for the Collective Model of Household Consumption," IZA Discussion Papers 3794, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Laurens Cherchye & Bram De Rock & Jeroen Sabbe & Frederic Vermeulen, 2008. "Nonparametric Tests of Collectively Rational Consumption Behavior: an Integer Programming Procedure," ECARES Working Papers 2008_001, Université Libre de Bruxelles, Ecares. [Downloadable!]
    Other versions:
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