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Household Bargaining with Limited Commitment: A Practitioners Guide

Author

Listed:
  • Adam Hallengreen

    (Department of Economics, University of Copenhagen)

  • Thomas H. Joergensen

    (Department of Economics, University of Copenhagen)

  • Annasofie M. Olesen

    (Department of Economics, University of Copenhagen)

Abstract

In this guide, we introduce the limited commitment model of dynamic household bargaining behavior over the life cycle. The guide is intended to make the limited commitment model more accessible to researchers who are interested in studying intra-household allocations and divorce over the life cycle. We mitigate computational challenges by providing a flexible base of code that can be customized and extended to the specific use case. The main contribution is to discuss practical implementation details of the model class, and provide guidance on how to efficiently solve limited commitment models using state-of-the-art numerical methods. The setup and solution algorithm is presented through a stylized example of dynamic consumption allocation and includes accompanying Python and C++ code used to generate all results.

Suggested Citation

  • Adam Hallengreen & Thomas H. Joergensen & Annasofie M. Olesen, 2024. "Household Bargaining with Limited Commitment: A Practitioners Guide," CEBI working paper series 24-09, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    • Handle: RePEc:kud:kucebi:2409
    as

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    File URL: https://www.econ.ku.dk/cebi/publikationer/working-papers/CEBI_WP_09-24.Rev.1.pdf
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    References listed on IDEAS

    as
    1. Ligon, Ethan, 2002. "Dynamic bargaining in households (with an application to Bangladesh)," CUDARE Working Paper Series 972, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
    2. Ligon, Ethan, 2002. "Dynamic Bargaining in Households (with application to Bangladesh)," CUDARE Working Papers 25102, University of California, Berkeley, Department of Agricultural and Resource Economics.
    3. Fedor Iskhakov & Thomas H. Jørgensen & John Rust & Bertel Schjerning, 2017. "The endogenous grid method for discrete‐continuous dynamic choice models with (or without) taste shocks," Quantitative Economics, Econometric Society, vol. 8(2), pages 317-365, July.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Household Bargaining; limited commitment; life cycle; couples; numerical dynamic programming;
    All these keywords.

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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