Working Paper: CEPR ID: DP5030
Authors: Hans Gersbach; Hans Haller
Abstract: We study household formation in a model where collective consumption decisions of a household depend on the strategic choices of its members. The surplus of households is determined by individual choices of levels of friendliness to each other. A strategic conflict arises from a coupling condition that ceteris paribus, a person's friendlier attitude reduces the individual's influence in the household's collective decision on how to divide the ensuing surplus. While partners in an isolated household choose the minimum level of friendliness, competition for partners tends to promote friendliness. We find that affluence does not buy affection, but can lead to withholding of affection by an affluent partner who can afford to do so. In general, the equilibrium degree of friendliness proves sensitive to the socio-economic composition of the population.
Keywords: collective decisions; competition for partners; coupling condition; friendliness; socioeconomic composition
JEL Codes: D13; D50; D70; J10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| competition for partners (L14) | friendliness among household members (I31) |
| friendliness among household members (I31) | bargaining power in resource allocation (C78) |
| competition for partners (L14) | bargaining power in resource allocation (C78) |
| friendliness among household members (I31) | competition for partners (L14) |