Household Decisions and Equivalence Scales

Udo Ebert and Patrick Moyes ()

No 404, IDEP Working Papers from Institut d'economie publique (IDEP), Marseille, France

Abstract: Considering an economy with two goods {a private good and a household good with a variable degree of publicness {and identical individuals, the paper investigates the implications for economies of size of two extreme households' decision rules: (i) the cooperative model, where households maximize the welfare of their members, and (ii) the non-cooperative model, where each household's member maximizes her own utility. Under the cooperative rule, publicness of the household good is necessary and sufficient for positive economies of size and for these to increase with family size. This no longer holds true under the non-cooperative rule where negative economies of size may appear even in the case where the household consumption good is purely public. The results suggest that it is the inefficiency of the non-cooperative rule that is at the origin of the problem. Furthermore comparison of the scale factors' values indicates that the cooperative rule leads to less generous scales than the non-cooperative one.

Keywords: Equivalence scales; Household decision rule; Welfare maximization; Non-cooperative behaviour; Returns to size. (search for similar items in EconPapers)
JEL-codes: D31 D63 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2004-03
New Economics Papers: this item is included in nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Household decisions and equivalence scales (2009)
Working Paper: Household decision and equivalence scales (2009)
Working Paper: Household decision and equivalence scales (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:iep:wpidep:0404

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