Household Formation and Markets

Hans Gersbach, Hans Haller and Hideo Konishi
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Hans Haller: Virginia Tech University

No 821, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: We consider competitive markets for multiple commodities with endogenous formation of one- or two-person households. Within each two-person household, externalities from the partner's commodity consumption and unpriced actions are allowed. Each individual has two types of traits: observable characteristics and unobservable taste characteristics. Each individual gets utility from his/her own private consumption, from discrete actions such as job-choice, from the partner's observable characteristics such as appearance and hobbies, from some of the partner's consumption vectors, and from the partner's action choices. We investigate competitive market outcomes with an endogenous household structure in which no individual and no man/woman-pair can deviate profitably. We find a set of sufficient conditions under which a stable matching equilibrium exists. We further establish the first welfare theorem for this economy.

Keywords: endogenous household formation of households; consumption externalities; stable matching equilibrium; efficiency (search for similar items in EconPapers)
JEL-codes: D51 D61 D71 (search for similar items in EconPapers)
Date: 2013-03-31, Revised 2016-11-01
New Economics Papers: this item is included in nep-gth and nep-mic
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Published, Economic Theory, 59, 461-507, 2015.

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Related works:
Journal Article: Household formation and markets (2015)
Working Paper: Household Formation and Markets (2013)
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