Abstract
We investigate the relationship between centralized and decentralized collective demand models applied to consumption within a household with multiple individuals. The centralized program is described by a Bergsonian representation of the household utility function and a household budget constraint, while the decentralized program is described by individual utility maximization subject to an income allocation among individual. The household income allocation among individuals involves an income sharing rule. We show that, in general, income shares are equal to the product of two weights: the Bergsonian weight and a weight reflecting income effects across individuals. We also show that the latter weights play a role in income sharing and in household welfare evaluation when individual preferences depart from quasi-homotheticity. We also examine how individual preferences affect the relationship between centralized and decentralized demand.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
