Household behavior and individual autonomy: an extended Lindahl mechanism (Q2447157)

The paper presents a model of a two-person household consisting of a wife \(A\) and a husband \(B\) which consume \(n\) private goods and \(m\) public goods under given prices. The preferences of the spouses are represented by utility functions \(U^J(q^J,Q)\), where \(J=A, B\), the vectors \(q^J\in{\mathbb{R}^n}\) represent private consumption and the vector \(Q\in{\mathbb{R}^m}\) represents public consumption. Each spouse \(J\) has an initial income \(Y^J\geq 0\), and the total income \(Y=Y^A+ Y^B > 0\). It is assumed that the spouses can agree on some mechanism to share the expenses for financing the public consumption. So, the decision problem is a two-person game, and the game is specified and investigated in different variants concerning autonomy of public consumption. ``The concept of `household \(\theta\)-equilibrium' is introduced through the Lindahl equilibrium for Nash implementation and its extension to semi-cooperation.'' Existence of the equilibrium is proved, and its characterization is revealed. An example of such a household is comprehensively investigated. Also the comparative statics of equations characterizing a household \(\theta\)-equilibrium are fulfilled.