The revealed preference approach to analyzing collective household consumption: a practical roadmap

This chapter surveys the current state of the nonparametric revealed preference(RP) approach to analyzing collective consumption behavior, and synthesizes the methodological tools that are available. It provides a practical roadmap for testing, recovering,and quantifying collectively rational (i.e. Pareto efficient) household consumption behavior without relying on any parametric assumptions regarding individual utilitiesor demand. Building on the RP tradition for the classic unitary model, we outline aframework for analyzing collective household decision making with private and public consumption. The framework uses personalized prices and quantities to representwithin-household allocation patterns, and employs the sharing rule to capture the distribution of resources across household members. We characterize collective rationalitythrough nonparametric testable implications, and we show that this characterizationprovides a productive basis for (set) identification procedures using linear and integerprogramming. We also discuss methodological extensions that integrate RP methodswith estimated demand systems, marriage market information, household production,and intertemporal decision environments. Finally, we briefly illustrate how the methodcan be used in empirical work to study sharing-rule bounds and poverty at the individual level.