Departures from Slutsky Symmetry in Noncooperative Household Demand Models

Valérie Lechene (), Ian Preston and University College London and Institute for Fiscal Studies

No 52, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: Maximisation of utility by a single consumer subject to a linear budget constraint is well known to imply strong restrictions on the properties of demand functions. Empirical applications to data on households however frequently reject these restrictions. In particular such data frequently show a failure of Slutsky symmetry - the restriction of symmetry on the matrix of compensated price responses. Browning and Chiappori (1998) show that under assumptions of efficient within-household decision making, the counterpart to the Slutsky matrix for demands from a k member household will be the sum of a symmetric matrix and a matrix of rank k 1. We establish the rank of the departure from Slutsky symmetry for couples under the assumption of Nash equilibrium in individual demands with both partners contributing to all public goods. We show that the Slutsky matrix is the sum of a symmetric matrix and another of rank at most 2. This result implies not only that the Browning-Chiappori assumption of efficiency can be tested against other models within the class of those based on individual optimisation, but also that the hypothesis of Nash equilibrium in demands has testable content against a general alternative.

Keywords: Nash equilibrium; intra-household allocation; Slutsky symmetry (search for similar items in EconPapers)
JEL-codes: C72 D11 (search for similar items in EconPapers)
Date: 2000-12-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://ora.ox.ac.uk/objects/uuid:7d4f5e1a-6a54-4d6c-8478-a2f2cf1ef611 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oxf:wpaper:52

Access Statistics for this paper

More papers in Economics Series Working Papers from University of Oxford, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Anne Pouliquen ( this e-mail address is bad, please contact ).