Pierre André Chiappori (Columbia) "Family Economics" - Cemmap

3
Preferences and decision
making
3.1 Preferences
In the last chapter we informally reviewed the gains from marriage in some
generality. The existence of potential gains from marriage is not sufficient to
motivate marriage and to sustain it. Prospective mates need to form some
notion as to whether families realize the potential gains and how they are
divided. In this chapter we consider these issues in a very specific context.
The context is a two person (woman a and man b) household 1 in which the
only (static) decision is how much to spend on various market goods that
areavailableatfixed prices, given fixed total household expenditure on
all goods. Although very special this context allows us to discuss formally
many of the issues that will be used in other contexts in later chapters.
Some commodities are private and some public. Private goods are consumed
non-jointly by each partner and public goods, such as heating, are
consumed jointly and non-exclusively by the two partners. In other words,
private goods are characterized by an exclusion restriction property: the
fact that I consume a particular apple de facto excludes anyone else from
consuming the same apple. With public goods, on the contrary, no such
restriction exists: that I enjoy seeing a beautiful painting on my wall does
not preclude my spouse from enjoying it just as much (or even disliking it).
Several remarks can be made at that point. First, several commodities are
sometimes used publicly and sometimes privately; for instance, I can drive
my car alone to go to work, or the whole family may take a ride together.
Second, the privateness or publicness of a good is quite independent of the
type of control existing on that good and who exerts it; typically, parents
have control over the (private) consumption of their young children. Finally,
and more crucially, there exist subtle interactions between the (‘technical’)
nature of a good and how it enters the member’s utilities. The private
consumptions of member a certainly enter a’s utility; but it also may enter
b’s - we then call it an externality. Conversely, some commodities, although
public by nature, may in fact be exclusively consumed by one member; for
instance, although both spouses may in principle watch television together
without exclusion, one of them may simply dislike TV and never use it.
Throughout most of the book, we assume, to keep things simple, that any
1 Children will be introduced at a later point.
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