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Econ Theory (2013) 54:485500
DOI 10.1007/s00199-012-0729-8
RESEARCH ARTICLE
Received: 28 September 2011 / Accepted: 8 November 2012 / Published online: 23 November 2012 Springer-Verlag Berlin Heidelberg 2012
Abstract We study the testability implications of public versus private consumption in collective models of group consumption. The distinguishing feature of our approach is that we start from a revealed preference characterization of collectively rational behavior. Remarkably, we nd that assumptions regarding the public or private nature of specic goods do have testability implications, even if one only observes the aggregate group consumption. In fact, these testability implications apply as soon as the analysis includes three goods and four observations. This stands in sharp contrast with existing results that start from a differential characterization of collectively rational behavior.
We are grateful to the editor and the anonymous referee for the time invested in our manuscript. We also want to thank Georg Kirchsteiger, Paola Conconi and participants of the Dauphine Workshop Recent Advances in Revealed Preference Theory: testable restrictions in markets and games in Paris, the ECORE Summer School Market Failure and Market Design in Louvain-La-Neuve and the EEA-ESEM conference in Malaga for useful comments. Laurens Cherchye gratefully acknowledges nancial support from the Research Fund K.U. Leuven through the grant STRT1/08/004. Bram De Rock gratefully acknowledges the European Research Council (ERC) for his Starting Grant.
L. Cherchye
Center for Economic Studies, University of Leuven, E. Sabbelaan 53, 8500 Kortrijk, Belgium e-mail: [email protected]
B. De Rock (B)
ECARES and ECORE, Universit Libre de Bruxelles, Avenue F.D. Roosevelt 50, 1050 Brussels, Belgiume-mail: [email protected]
V. Platino
Centre dEconomie de la Sorbonne, Paris School of EconomicsUniversit Paris 1 PanthonSorbonne, 106-112 Boulevard de lHpital, 75647 Paris Cedex 13, Francee-mail: [email protected]
Private versus public consumption within groups: testing the nature of goods from aggregate data
Laurens Cherchye Bram De Rock
Vincenzo Platino
123
486 L. Cherchye et al.
Keywords Multi-person group consumption Collective model Revealed
preferences Public goods Private goods Consumption externalities
JEL Classication D11 D12 D13 C14
1 Introduction
There is a growing consensus that multi-person group (e.g., household) consumption behavior should no longer be treated as if the group were a single decision maker that optimizes a group utility function subject to the group budget constraint. Indeed, this so-called unitary model of group...