Working Paper: CEPR ID: DP5687
Authors: Hans Gersbach; Hans Haller
Abstract: The relationship between our general equilibrium model with multimember households and club models with multiple private goods is investigated. The main distinction in the definitions consists of the equilibrium concepts. As a rule, competitive equilibria among households where no group of consumers can benefit from forming a new household and valuation equilibria prove equivalent in the absence of consumption externalities, but not in their presence. We provide several examples and applications.
Keywords: clubs; consumption externalities; general equilibrium; household behaviour; household formation
JEL Codes: D13; D50; D62; D71
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| household decisions (D10) | resource allocation among consumers (D10) |
| economic considerations (A13) | household formation (J12) |
| absence of consumption externalities (D62) | competitive equilibria coincide with valuation equilibria (D50) |
| presence of consumption externalities (D62) | valuation equilibrium may not exist (D46) |
| Pareto-optimal allocation does not exist (D61) | valuation equilibrium does not exist (D46) |
| competitive equilibrium allocation is achieved (D51) | Pareto-optimal allocation in valuation equilibrium does not exist (D51) |
| club contracts can sustain allocations (Z23) | restrict private consumption among members (P35) |
| presence of consumption externalities (D62) | equilibrium outcomes lead to potential inefficiencies (D50) |