Research Article

Economic Theory

, Volume 54, Issue 3, pp 485-500

Private versus public consumption within groups: testing the nature of goods from aggregate data

  • Laurens CherchyeAffiliated withCenter for Economic Studies, University of Leuven
  • , Bram De RockAffiliated withECARES and ECORE, Université Libre de Bruxelles Email author 
  • , Vincenzo PlatinoAffiliated withCentre d’Economie de la Sorbonne, Paris School of Economics–Université Paris 1 Panthéon–Sorbonne

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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 find that assumptions regarding the public or private nature of specific 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.

Keywords

Multi-person group consumption Collective model Revealed preferences Public goods Private goods Consumption externalities

JEL Classification

D11 D12 D13 C14