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Private versus public consumption within groups : testing the nature of goods from aggregate data

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  • Laurens Cherchye

    ()
    (CentER - Tilburg University and Center for Economic Studies - University of Leuven)

  • Bram De Rock

    ()
    (ECARES and ECORE - Université Libre de Bruxelles)

  • Vincenzo Platino

    ()
    (Centre d'Economie de la Sorbonne - Paris School of Economics)

Abstract

We study the testability implications of public versus private consumption. The distinguishing feature of our approach is that we start from a revealed preference characterization of collectively rational behavior. Remarkably, we find that assumptions regarding the public or private nature of specific goods do have testability implications, even if one only observes the aggregate group consumption. In fact, these testability implications apply as soon as the analysis includes three goods and four obervations. This stands in sharp contrast with existing results that start from a differential characterization of collectively rational behavior. In our opinion, our revealed preference approach obtains stronger testability conclusions because it focuses on a global characterization of collective rationality, whereas the differential approach starts from a local characterization.

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Bibliographic Info

Paper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number 10090.

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Length: 17 pages
Date of creation: Aug 2010
Date of revision:
Handle: RePEc:mse:cesdoc:10090

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Keywords: Multi-person group consumption; collective model; revealed preferences; public goods; private goods; consumption externalities.;

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  1. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2010. "An Afriat theorem for the collective model of household consumption," ULB Institutional Repository 2013/131711, ULB -- Universite Libre de Bruxelles.
  2. M. Browning & P. A. Chiappori, 1998. "Efficient Intra-Household Allocations: A General Characterization and Empirical Tests," Econometrica, Econometric Society, vol. 66(6), pages 1241-1278, November.
  3. Laurens Cherchye & Bram De Rock & Jeroen Sabbe & Frederic Vemeulen, 2008. "Nonparametric tests of collectively rational consumption behavior: an integer programming procedure," Center for Economic Studies - Discussion papers ces0801, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  4. Hans Gersbach & Hans Haller, 2005. "When inefficiency begets efficiency," Economic Theory, Springer, vol. 25(1), pages 105-121, 01.
  5. Cherchye, L.J.H. & Rock, B. de & Vermeulen, F.M.P., 2004. "The Collective Model of Household Consumption: A Nonparametric Characterization," Discussion Paper 2004-76, Tilburg University, Center for Economic Research.
  6. Cherchye, L.J.H. & Rock, B. de & Vermeulen, F.M.P., 2011. "The revealed preference approach to collective consumption behavior: Testing and sharing rule recovery," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3857700, Tilburg University.
  7. William T. Harbaugh & Kate Krause & Timothy R. Berry, 2001. "GARP for Kids: On the Development of Rational Choice Behavior," American Economic Review, American Economic Association, vol. 91(5), pages 1539-1545, December.
  8. Pollak, Robert A, 1990. "Distinguished Fellow: Houthakker's Contributions to Economics," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 141-56, Spring.
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  11. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-73, July.
  12. William Harbaugh & Kate Krause & Timothy Berry, 2001. "Garp for kids: On the development of rational choice behavior," Artefactual Field Experiments 00056, The Field Experiments Website.
  13. Sabrina Bruyneel & Laurens Cherchye & Bram De Rock, 2012. "Collective consumption models with restricted bargaining weights: an empirical assessment based on experimental data," Review of Economics of the Household, Springer, vol. 10(3), pages 395-421, September.
  14. P.-A. Chiappori & I. Ekeland, 2009. "The Microeconomics of Efficient Group Behavior: Identification," Econometrica, Econometric Society, vol. 77(3), pages 763-799, 05.
  15. Chiappori, P.A., 1989. "Collective Labour Supply and Welfare," DELTA Working Papers 89-07, DELTA (Ecole normale supérieure).
  16. Diewert, W E, 1973. "Afriat and Revealed Preference Theory," Review of Economic Studies, Wiley Blackwell, vol. 40(3), pages 419-25, July.
  17. 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.
  18. Sippel, Reinhard, 1997. "An Experiment on the Pure Theory of Consumer's Behaviour," Economic Journal, Royal Economic Society, vol. 107(444), pages 1431-44, September.
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