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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. Diewert, W E, 1973. "Afriat and Revealed Preference Theory," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 40(3), pages 419-25, July.
  2. Cherchye, L.J.H. & Rock, B. de & Vermeulen, F.M.P., 2004. "The Collective Model of Household Consumption: A Nonparametric Characterization," Discussion Paper, Tilburg University, Center for Economic Research 2004-76, Tilburg University, Center for Economic Research.
  3. Cherchye, L.J.H. & Rock, B. de & Vermeulen, F.M.P., 2008. "An Afriat Theorem for the Collective Model of Household Consumption," Discussion Paper, Tilburg University, Center for Economic Research 2008-72, Tilburg University, Center for Economic Research.
  4. Cherchye, L.J.H. & Rock, B. de & Sabbe, J. & Vermeulen, F.M.P., 2008. "Nonparametric Tests of Collectively Rational Consumption Behavior: An Integer Programming Procedure," Discussion Paper, Tilburg University, Center for Economic Research 2008-2, Tilburg University, Center for Economic Research.
  5. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, Econometric Society, vol. 50(4), pages 945-73, July.
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  10. 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.
  11. 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.
  12. A. Fostel & H. Scarf & M. Todd, 2004. "Two new proofs of Afriat’s theorem," Economic Theory, Springer, Springer, vol. 24(1), pages 211-219, 07.
  13. Sippel, Reinhard, 1997. "An Experiment on the Pure Theory of Consumer's Behaviour," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(444), pages 1431-44, September.
  14. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, Econometric Society, vol. 56(1), pages 63-90, January.
  15. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2011. "The Revealed Preference Approach to Collective Consumption Behaviour: Testing and Sharing Rule Recovery," Review of Economic Studies, Oxford University Press, vol. 78(1), pages 176-198.
  16. P.-A. Chiappori & I. Ekeland, 2009. "The Microeconomics of Efficient Group Behavior: Identification," Econometrica, Econometric Society, Econometric Society, vol. 77(3), pages 763-799, 05.
  17. 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.
  18. 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.
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