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Household Formation and Markets

  • Hans Gersbach

    (ETH Zurich)

  • Hans Haller

    (Virginia Tech University)

  • Hideo Konishi

    ()

    (Boston College)

We consider competitive markets for multiple commodities with endogenous formation of one- or two-person households. Within each two-person household, externalities from the partner's commodity consumption and unpriced actions are allowed. Each individual has two types of traits: observable characteristics and unobservable taste characteristics. Each individual gets utility from his/her own private consumption, from discrete actions such as job-choice, from the partner's observable characteristics such as appearance and hobbies, from some of the partner's consumption vectors, and from the partner's action choices. We investigate competitive market outcomes with an endogenous household structure in which no individual and no man/woman-pair can deviate profitably. We find a set of sufficient conditions under which a stable matching equilibrium exists. We further establish the first welfare theorem for this economy.

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Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 821.

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Date of creation: 31 Mar 2013
Date of revision: 15 Dec 2014
Publication status: forthcoming, Economic Theory
Handle: RePEc:boc:bocoec:821
Contact details of provider: Postal: Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA
Phone: 617-552-3670
Fax: +1-617-552-2308
Web page: http://fmwww.bc.edu/EC/
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  1. Gersbach, Hans & Haller, Hans, 2008. "Club Theory and Household Formation," Sonderforschungsbereich 504 Publications 08-11, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  2. Ellickson, Bryan & Grodal, Birgit & Scotchmer, Suzanne & Zane, William R., 1997. "clubs and the Market: Large Finite Economies," Department of Economics, Working Paper Series qt10k1b44j, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  3. Konishi, Hideo, 2013. "Entrepreneurial land developers: Joint production, local externalities, and mixed housing developments," Journal of Urban Economics, Elsevier, vol. 75(C), pages 68-79.
  4. Michele Gori, 2010. "Endogenous household formation and inefficiency in a general equilibrium model," Working Papers - Mathematical Economics 2010-09, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa, revised Oct 2010.
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