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Testable implications of transferable utility

Listed author(s):
  • Chiappori, Pierre-Andre

Although the Transferable Utility (TU) assumption is widely used in micro theory, little is known about its testable consequences, and in particular how one can, from the observation of a group's demand, test whether the TU assumption is satisfied within this group. We derive a set of necessary and sufficient conditions on demand that characterize the TU context. The conditions are of two types. First, TU requires the group to behave as a single decision maker. Secondly, within the unitary setting, the representative utility generated by a TU framework must be of the Generalized Quasi-Linear (GQL) form. We derive testable properties of the demand function that fully characterize GQL utilities. These additional restrictions only involve specific prices - namely, those of the goods that are publicly consumed within the group.

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File URL: http://www.sciencedirect.com/science/article/pii/S0022-0531(10)00017-7
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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 145 (2010)
Issue (Month): 3 (May)
Pages: 1302-1317

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Handle: RePEc:eee:jetheo:v:145:y:2010:i:3:p:1302-1317
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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  1. Eugene Choo & Aloysius Siow, 2006. "Who Marries Whom and Why," Journal of Political Economy, University of Chicago Press, vol. 114(1), pages 175-201, February.
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  6. 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.
  7. Chiappori, Pierre-Andre, 1992. "Collective Labor Supply and Welfare," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 437-467, June.
  8. Bergstrom, Theodore C & Cornes, Richard C, 1983. "Independence of Allocative Efficiency from Distribution in the Theory of Public Goods," Econometrica, Econometric Society, vol. 51(6), pages 1753-1765, November.
  9. Becker, Gary S, 1992. "Fertility and the Economy," Journal of Population Economics, Springer;European Society for Population Economics, vol. 5(3), pages 185-201, August.
  10. Bergstrom, Theodore C, 1989. "A Fresh Look at the Rotten Kid Theorem--and Other Household Mysteries," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1138-1159, October.
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