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Household decisions and equivalence scales

Abstract

Considering an economy with a private good and a household good with a variable degree of publicness, we examine the consequences of two extreme decision rules: (1) the cooperative model, where households maximize the welfare of their members, and (2) the noncooperative model, where each household’s member maximizes her own utility. While publicness of the household good is necessary and sufficient for economies of size to exist and to increase with family size under cooperation, it is shown that this no longer holds in the absence of cooperation. On the other hand, the cooperative rule leads to less generous scales than the noncooperative one.

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Correspondence to Patrick Moyes.

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Responsible editor: Junsen Zhang

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Ebert, U., Moyes, P. Household decisions and equivalence scales. J Popul Econ 22, 1039 (2009). https://doi.org/10.1007/s00148-008-0186-7

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Keywords

  • Equivalence scales
  • Household decision rule
  • Economies of size

JEL Classification

  • D31
  • D63