Interdependent Preferences, Potential Games and Household Consumption

Rahul Deb

MPRA Paper from University Library of Munich, Germany

Abstract: This paper presents a nonparametric model of interdependent preferences, where an individual’s consumption may be an externality on the preferences of other consumers. We assume that individual price consumption data is observed for all consumers and prove that the general model imposes few restrictions on the observed data, where the consistency requirement is Nash rationalizability. We motivate potential games as an important sub class of games where the family of concave potential games is refutable and imposes stronger restrictions on observed data. As an application of this model, we discuss inter-household consumption data. Finally, we use this framework to extend the analysis of Brown and Matzkin (1996) on refutable pure exchange economies to pure exchange economies with externalities.

Keywords: Potential games; Externalities; Nonparametric restrictions; Revealed Preference; Household consumption; Nash-Walras equilibrium (search for similar items in EconPapers)
JEL-codes: C14 C72 D11 D51 (search for similar items in EconPapers)
Date: 2008-01
New Economics Papers: this item is included in nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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