Household Decisions and Equilibrium Efficiency

Hans Haller

International Economic Review, 2000, vol. 41, issue 4, 835-47

Abstract: A general equilibrium model is introduced where a household may consist of several members, each with individual preferences and/or resources. When households obey collective rationality, certain intrahousehold externalities can be fully internalized by the respective households so that competitive exchange among households is efficient. As a rule, however, such intrahousehold externalities are not fully internalized by individual household members acting in their personal interest so that competitive exchange among such individuals is only efficient in exceptional cases. Copyright 2000 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 2000
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