Testable implications of transferable utility

Pierre Chiappori

Journal of Economic Theory, 2010, vol. 145, issue 3, 1302-1317

Abstract: Although the Transferable Utility (TU) assumption is widely used in micro theory, little is known about its testable consequences, and in particular how one can, from the observation of a group's demand, test whether the TU assumption is satisfied within this group. We derive a set of necessary and sufficient conditions on demand that characterize the TU context. The conditions are of two types. First, TU requires the group to behave as a single decision maker. Secondly, within the unitary setting, the representative utility generated by a TU framework must be of the Generalized Quasi-Linear (GQL) form. We derive testable properties of the demand function that fully characterize GQL utilities. These additional restrictions only involve specific prices - namely, those of the goods that are publicly consumed within the group.

Date: 2010
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:145:y:2010:i:3:p:1302-1317

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