Abstract

In this lecture, we provide an introduction to the revealed preference (RP) approach to analyzing non-unitary household consumption behavior. We start by briefly recapturing the RP characterization of the unitary consumption model, which treats the household as a single decision making unit. Subsequently, we introduce the RP characterizations of two benchmark non-unitary consumption models, which explicitly recognize that multi-person households consist of multiple decision makers. In particular, we consider both the cooperative (or “collective”) model and the non-cooperative model. We show how these RP characterizations can be brought into practice (for testing, identification and counterfactual analysis) by reformulating them in integer programming (IP) terms. We also demonstrate the empirical usefulness of these IP formulations by means of some illustrative applications. Finally, we conclude by discussing empirical issues that are specific to the RP analysis of non-unitary consumption models.