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When inefficiency begets efficiency

Author

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  • Hans Gersbach

  • Hans Haller

Abstract

Collective consumption decisions taken by the members of a household may prove inefficient. The impact on market performance depends on whether household inefficiencies are caused by inefficient net trades with the market or by inefficient distribution of resources within households. Inefficient internal distribution always results in inefficient equilibrium allocations. This leads us to consider competitive forces as disciplinary device for households. Competition of households for both resources and members can eliminate or reduce inefficient internal distribution. Copyright Springer-Verlag Berlin/Heidelberg 2005

Suggested Citation

  • Hans Gersbach & Hans Haller, 2005. "When inefficiency begets efficiency," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 25(1), pages 105-121, January.
    • Handle: RePEc:spr:joecth:v:25:y:2005:i:1:p:105-121
    DOI: 10.1007/s00199-004-0469-5
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    Cited by:

    1. Gersbach, Hans & Haller, Hans, 2006. "Clubs and Households," CEPR Discussion Papers 5687, C.E.P.R. Discussion Papers.
    2. Gersbach, Hans & Haller, Hans, 2010. "Club theory and household formation," Journal of Mathematical Economics, Elsevier, vol. 46(5), pages 715-724, September.
    3. Michele Gori & Antonio Villanacci, 2011. "A bargaining model in general equilibrium," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 46(3), pages 327-375, April.
    4. Laurens Cherchye & Bram De Rock & Vincenzo Platino, 2013. "Private versus public consumption within groups: testing the nature of goods from aggregate data," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 54(3), pages 485-500, November.
    5. Hans Gersbach & Hans Haller, 2002. "Competitive Markets, Collective Decisions and Group Formation," Discussion Papers 02-11, University of Copenhagen. Department of Economics.
    6. Gersbach, Hans & Haller, Hans, 2011. "Groups, collective decisions and markets," Journal of Economic Theory, Elsevier, vol. 146(1), pages 275-299, January.

    More about this item

    Keywords

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    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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