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Interdependent Preferences, Potential Games and Household Consumption

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  • Deb, Rahul

Abstract

This paper presents a nonparametric model of interdependent preferences, where an individual’s consumption may be an externality on the preferences of other consumers. We assume that individual price consumption data is observed for all consumers and prove that the general model imposes few restrictions on the observed data, where the consistency requirement is Nash rationalizability. We motivate potential games as an important sub class of games where the family of concave potential games is refutable and imposes stronger restrictions on observed data. As an application of this model, we discuss inter-household consumption data. Finally, we use this framework to extend the analysis of Brown and Matzkin (1996) on refutable pure exchange economies to pure exchange economies with externalities.

Suggested Citation

  • Deb, Rahul, 2008. "Interdependent Preferences, Potential Games and Household Consumption," MPRA Paper 6818, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:6818
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    File URL: https://mpra.ub.uni-muenchen.de/6818/1/MPRA_paper_6818.pdf
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    References listed on IDEAS

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    6. M. Browning & P. A. Chiappori, 1998. "Efficient Intra-Household Allocations: A General Characterization and Empirical Tests," Econometrica, Econometric Society, vol. 66(6), pages 1241-1278, November.
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    More about this item

    Keywords

    Potential games; Externalities; Nonparametric restrictions; Revealed Preference; Household consumption; Nash-Walras equilibrium;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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