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Group Consumption with Caring Individuals

Laurens Cherchye (), Sam Cosaert, Thomas Demuynck () and Bram De Rock

No ECARES 2017-45, Working Papers ECARES from ULB -- Universite Libre de Bruxelles

Abstract: We propose a novel approach to model joint consumption decisions of individuals who care for each other. We assume noncooperative interaction between the different individuals and the within-group consumption outcome critically depends on the degree of caring between the group members. By varying the degree of caring, the model encompasses a whole continuum of group consumption models that are situated between the fully cooperative model (assuming a Pareto optimal outcome) and the noncooperative model without caring (assuming a public good game with voluntary contributions). This feature is used to define a measure for the degree of cooperation within the group, which quantifies how close the observed group behavior is to the fully cooperative benchmark. We also establish a dual characterization of our noncooperative model with caring preferences: we show that the model is dually equivalent to a noncooperative model with non-caring preferences that is characterized by intra-group transfers. Following a revealed preference approach, we derive testable implications of the model for empirical data. Finally, we also use our model to analyze decisions made by dyads of children in an experimental setting. We find considerable heterogeneity in the degree of caring (or cooperation) across dyads, which correlates with assertiveness and the degree of interaction within dyads.

JEL-codes: D11 D12 D13 C14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cdm, nep-dem and nep-gth
Date: 2017-11
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