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Measuring the willingness‐to‐pay for others' consumption: An application to joint decisions of children

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  • Sabrina Bruyneel
  • Laurens Cherchye
  • Sam Cosaert
  • Bram De Rock
  • Siegfried Dewitte

Abstract

We propose a method to quantify other‐regarding preferences in group decisions. Our method is based on revealed preference theory. It measures willingness‐to‐pay for others' consumption and willingness‐to‐pay for equality in consumption by evaluating consumption externalities in monetary terms. We introduce an altruism parameter and an inequality aversion parameter. Each parameter defines a continuum of models characterized by varying degrees of externalities. We study the empirical performance of our method through a simulation analysis, in which we also investigate the impact of measurement error and increased sample size. Finally, we use our method to analyze decisions made by dyads of children in an experimental setting. We find that children's decisions are particularly characterized by varying levels of altruism. We relate this heterogeneity across children to age, gender, and the degree of friendship in dyads.

Suggested Citation

  • Sabrina Bruyneel & Laurens Cherchye & Sam Cosaert & Bram De Rock & Siegfried Dewitte, 2017. "Measuring the willingness‐to‐pay for others' consumption: An application to joint decisions of children," Quantitative Economics, Econometric Society, vol. 8(3), pages 1037-1082, November.
    • Handle: RePEc:wly:quante:v:8:y:2017:i:3:p:1037-1082
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    Cited by:

    1. 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).
    2. 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.
    3. 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.
    4. 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).

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