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Measuring the willingness-to-pay for others' consumption: an application to joint decisions of children

Author

Listed:
  • Sabrina BRUYNEEL
  • Laurens CHERCHYE
  • Sam COSAERT
  • Bram DE ROCK
  • Siegfried DEWITTE
Abstract
We propose a method to quantify the willingness-to-pay for the consumption of others in group decisions. Our method is based on revealed preference theory. It measures willingness-to-pay for others' consumption by evaluating positive consumption externalities in monetary terms. Within the framework of cooperative (i.e. Pareto efficient) consumption behavior, we introduce a selfishness parameter that defines a continuum of models that are characterized by varying degrees of consumption externalities. We use our method to analyze decisions made by dyads of children in an experimental consumption setting. We find that children's consumption decisions are systematically characterized by externalities (i.e. non-selfish). But we also observe that there is substantial heterogeneity across children, which we can relate to differences in age, gender and degree of friendship between dyad members.

Suggested Citation

  • Sabrina BRUYNEEL & Laurens CHERCHYE & Sam COSAERT & Bram DE ROCK & Siegfried DEWITTE, 2014. "Measuring the willingness-to-pay for others' consumption: an application to joint decisions of children," Working Papers of Department of Economics, Leuven ces14.22, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    • Handle: RePEc:ete:ceswps:ces14.22
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    Cited by:

    1. Laurens Cherchye & Sam Cosaert & Thomas Demuynck & Bram De Rock, 2020. "Group Consumption with Caring Individuals," The Economic Journal, Royal Economic Society, vol. 130(627), pages 587-622.
    2. Cosaert, Sam & Lefebvre, Mathieu & Martin, Ludivine, 2022. "Are preferences for work reference dependent or time nonseparable? New experimental evidence," European Economic Review, Elsevier, vol. 148(C).
    3. Donni, Olivier & Molina, José Alberto, 2018. "Household Collective Models: Three Decades of Theoretical Contributions and Empirical Evidence," IZA Discussion Papers 11915, Institute of Labor Economics (IZA).
    4. Sabrina Bruyneel & Laurens Cherchye & Sam Cosaert & Bram De Rock & Siegfried Dewitte, 2020. "Verbal Aptitude Hurts Children’s Economic Decision Making Accuracy," Working Papers ECARES 2020-22, ULB -- Universite Libre de Bruxelles.

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