Behavioral games and intrahousehold allocation: teenage mothers and their mothers in Brazil

Abstract

Two games from experimental economics are paired to test household models. These experimental techniques can be helpful for informing policy that assigns welfare transfers, especially in the context of endogenous relationships or when impoverished families are omitted from income separability tests due to a lack of non-labor income, which is required for demand analysis of intrahousehold models. A trust game tests for Pareto efficiency, and a newly developed game tests for bargaining by determining if willingness-to-pay for a product changes based on endowment ownership. These games are applied in Salvador, Brazil, to a population not yet studied in the economic intrahousehold literature: adolescent mothers who live with their mothers. Their relationship is key for the welfare of adolescents’ children. The game outcomes reject Pareto efficiency but little evidence of bargaining is found. Qualitative survey questions confirm a cooperative relationship.