Intertemporal collective consumption

decisions:
a revealed preference analysis
Laurens Cherchye, Bram De Rocky,
Jeroen Sabbezand Ewout Verriestx

[preliminary draft - not to be quoted without permission]

February 12, 2010

Abstract
We provide a revealed preference methodology for analyzing in-
tertemporal household consumption behavior in terms of the collec-
tive model. Following Mazzocco (2007), we focus on the full commit-
ment model and the no commitment model. We develop revealed
preference conditions that allow for testing data consistency with
these intertemporal consumption models in a nonparametric man-
ner, i.e. while avoiding imposing (typically nonveri…able) paramet-
ric/functional structure for the household decision process. In turn,
CentER, Tilburg University, and Center for Economic Studies, University of Leu-
ven. E. Sabbelaan 53, B-8500 Kortrijk, Belgium. E-mail: laurens.cherchye@kuleuven-
kortrijk.be. Laurens Cherchye gratefully acknowledges …nancial support from the Research
Fund K.U.Leuven through the grant STRT1/08/004.
y
ECARES and ECORE, Université Libre de Bruxelles. Avenue F.D. Roosevelt 50, CP
114, 1050 Brussels, Belgium. E-mail: bderock@ulb.ac.be.
z
Center for Economic Studies, University of Leuven. E. Sabbelaan 53, B-8500 Kortrijk,
Belgium. E-mail: Jeroen.Sabbe@kuleuven-kortrijk.be. Jeroen Sabbe gratefully acknowl-
edges the Fund for Scienti…c Research - Flanders (FWO-Vlaanderen) for …nancial support.
x
Center for Economic Studies, University of Leuven. E. Sabbelaan 53, B-8500 Kor-
trijk, Belgium. E-mail: Ewout.Verriest@kuleuven-kortrijk.be. Ewout Verriest gratefully
acknowledges the Fund for Scienti…c Research - Flanders (FWO-Vlaanderen) for …nancial
support.

1
 this implies an operational test for commitment, which can be inter-
esting from a policy point of view. An empirical application illustrates
our methodology. In this application we also discuss an intermediate
‘limited’commitment model that is situated between the full commit-
ment and no commitment models.
JEL Classi…cation: D11, D12, D13, C14.
Keywords: household economics, collective consumption model, in-
tertemporal consumption model, commitment, revealed preferences.

1 Introduction
There is a growing consensus that a realistic modeling of household con-
sumption behavior must take into account preference heterogeneity within
the household. In many cases, the household decision-making process cannot
be explained by the restrictive unitary framework, which models the house-
hold as if it were a single decision maker.1 In addition, many household
decisions are inherently intertemporal. For example, such intertemporal in-
terdependence typically applies to decisions on family savings, investment
in human capital, housing purchase, fertility decisions, etc. This directly
extends to a consumption setting. In many cases, consumption today im-
pacts on consumption tomorrow and vice versa (e.g. because of (dis)saving
possibilities).
Mazzocco (2007) introduced a household consumption model that takes
both these aspects into account. He uses a collective model, which means
that he explicitly recognizes that a multi-person household consists of mul-
tiple members (decision makers) with their own preferences. As such, the
model considers the observed household consumption behavior as the re-
sult of a within-household bargaining process between these members. It
(only) assumes that this process yields a Pareto e¢ cient within-household
allocation.2 Next, Mazzocco adopts the life cycle modeling of intertemporal
consumption decisions. Essentially, this obtains a collective extension of the
1
Many studies reject the empirical validity of the unitary model for multi-person house-
hold behavior. See, for example, Lundberg (1988), Thomas (1990), Fortin and Lacroix
(1997), Browning and Chiappori (1998), Chiappori, Fortin and Lacroix (2002), Du‡o
(2003) and Cherchye and Vermeulen (2008).
2
See, for example, Chiappori (1988, 1992) for seminal contributions on the collective
model for multi-person household consumption and Apps and Rees (1988) for a closely
related approach.

2
widely applied unitary life cycle consumption model.3
More speci…cally, Mazzocco distinguishes between two versions of the in-
tertemporal collective consumption model: the full commitment model and
the no commitment model. A main argument is that the two versions have
very di¤erent policy implications; and this makes it relevant to test (and com-
pare) their empirical validity. Mazzocco also developed a characterization of
the two versions, which e¤ectively establishes such an empirical (commit-
ment) test. We will brie‡y recapture the full commitment model and the
no commitment model in Section 2; this will also explain Mazzocco’s key
notion of commitment. Essentially, commitment refers to the period of time
over which the relative bargaining weights of individual household members
remain constant (enforced by some explicit or implicit intrahousehold con-
tract).
This paper presents a revealed preference characterization (and corre-
sponding tests) of Mazzocco’s full commitment and no commitment models.
In the tradition of Afriat (1967) and Varian (1982),4 we derive necessary and
su¢ cient conditions for household consumption data to be consistent with
a particular model. These conditions then enable checking consistency of a
given data set with the model; in the spirit of Varian (1982), we refer to this
as ‘testing’data consistency with the model under study.5 More speci…cally,
we are able to verify these conditions in a fully nonparametric way, i.e. the
associated tests do not require an a priori (typically non-veri…able) para-
metric speci…cation of the intrahousehold decision process (e.g. individual
preferences). This contrasts with the tests that were originally proposed by
Mazzocco (2007), which do require such a parametric speci…cation.
At this point, it is also interesting to relate our …ndings to the earlier work
of Browning (1989) and Cherchye, De Rock and Vermeulen (2007, 2009a,b).
Browning provided a revealed preference characterization of the unitary life
cycle model (see also Crawford, 2009, for recent discussion).6 We extend
3
See, for example, Browning and Crossley (2001) for an extensive overview of the
literature on the unitary life cycle model.
4
See also Samuelson (1938), Houthakker (1950) and Diewert (1973) for seminal contri-
butions on the revealed preference approach to analyzing consumption behavior.
5
As is standard in the revealed preference literature, the type of tests that we consider
here are ‘sharp’tests; either a data set satis…es the data consistency conditions or it does
not.
6
Crawford (2009) extended Browning’s (1989) characterization of the life cycle con-
sumption model by accounting for habit formation in the household consumption. Inte-
grating these insights in our revealed preference characterization is work for future research.

3
this characterization to a collective setting. Next, Cherchye, De Rock and
Vermeulen established the revealed preference characterization of the ‘static’
collective consumption model. We extend this characterization by accounting
for intertemporal consumption relations.
The rest of the paper unfolds as follows. The next section brie‡y recap-
tures Mazzocco’s (2007) modeling of intertemporal collective consumption;
we consider the case of full commitment and the case of no commitment. We
will also discuss the policy relevance of empirical tests of commitment. Sec-
tion 3 introduces the revealed preference characterization of the two versions
of the intertemporal collective consumption model. Section 4 provides the
empirical results of the no commitment model, the full commitment model
and an intermediate ‘limited’commitment model, based on panel data drawn
from the Russian Longitudinal Monitoring Survey. Section 5 concludes and
hints at future research topics. The Appendices contain the proofs of our
results.

2 Intertemporal collective consumption with

and without commitment
We consider a household with M household members. The household has to
decide over the consumption of a bundle of N private goods and a bundle of
K public goods. Given private and public consumption in the household, the
utility of each member m is given by the function um (qm ; Q), with qm 2 RN +
the private consumption bundle of m, and Q 2 RK + the public consump-
tion bundle.7 Throughout, we will assume that each utility function um is
continuous, concave, non-satiated and non-decreasing in its arguments.
The empirical analysis of household consumption starts from a data set
S = fpt ; Pt ; qt ; Qt jt = 1; :::; T g, which pertains to a given number of
XT
periods T . For each period t 2 f1; :::T g, the vectors Qt and qt (= qm
t )
t=1
represent the household bundles of public and private goods demanded at t;
and we use pt 2 RN ++ for the price vector of the private commodities and
Pt 2 RK ++ for the price vector of the public commodities. In what follows,
7
Throughout, we will abstract from externalities associated with privately consumed
quantities. Importantly, however, our setting can actually account for such externalities.
Speci…cally, if an individual is the exclusive consumer of a particular private good, then
we can account for externalities for this good by formally treating it as a public good.

4
we will use yt = pt 0qt + Pt 0Qt .
As indicated above, we will adopt a life cycle approach to modeling in-
tertemporal collective consumption behavior. In doing so, we will assume
exponential utility discounting. More speci…cally, we will assume m repre-
sents the (…xed) personal utility discount factor for each individual m. The
same assumption was made by Crawford (2009), who focused on revealed
preference characterizations of intertemporal consumption models in a uni-
tary set-up.8 In what follows, we consider m as given. If this is not the case
then one can, as is suggested in Crawford (2009), perform a grid search that
considers di¤erent possible values of m . See also our empirical application
in Section 4.

2.1 Full commitment

As indicated above, the collective model assumes Pareto e¢ ciency. For our
setting with concave utility functions, a Pareto optimal allocation is usually
characterized as maximizing a weighted sum of individual utilities um subject
to the given budget constraint. The weights m associated with each um are
then typically interpreted as bargaining weights for the di¤erent members
m. In the collective set-up, these bargaining weights depend on the so-called
distribution factors Z. These factors include, for example, exogenous income
of individual household members, sex ratio within the relevant region, the
country’s divorce legislation, etc. (see, for example, Browning, Bourguignon,
Chiappori and Lechene (1994) for more discussion). Importantly, in general
the value of Z may vary over time periods t. As is currently standard in re-
vealed preference tests, we will assume that the distribution factors Z are not
observed. However, the notion will be crucial for sketching the key di¤erence
between the full commitment and the no commitment model. In Section 4,
we will brie‡y return to the possibility of using information on Z in empirical
applications.
The concept of commitment crucially relates to the bargaining weights
m
t associated with the di¤erent periods t. Essentially, it pertains to the
extent to which the household members anticipate possible variation in the
weights m t when choosing their consumption path for the time horizon under
consideration. In the full commitment model, the bargaining weights m t are
8
Browning (1989) abstracted from utility discounting, which corresponds to m = 1.
Evidently, our model includes the assumption m = 1 as a special case.

5
held constant, i.e. m t =
m
for all t. The interpretation is as follows. At
t = 1, all members decide how to divide the ‘power’in the household for the
entire future horizon, i.e. for each m they …x the weight m that will prevail
for the entire time horizon. Once the members have decided on this relative
bargaining power, they are fully committed to it and cannot renegotiate
afterwards. Putting it di¤erently, the full commitment model assumes an
(explicit or implicit) contract set up at time t = 1, which stipulates the
individual bargaining weights for all future periods. Inter alia, this means
that the unanticipated variation in Z over time periods t is irrelevant for the
household consumption path that is chosen. While changes of Z that are
anticipated at t = 1 can have an impact on the intrahousehold allocation;
see our discussion in Section 2.3.
More formally, under full commitment the household chooses for each
t 2 f1; :::; T g private consumption quantities qm t and public consumption
quantities Qt that satisfy the following condition:

X
M X
T
t 1 m
q1t ; :::; qM
t ; Qt 2 arg max m m
m u (xt ; Xt ) (FC)
x1t ;:::;xM
t ;Xt m=1 t=1

X
T X
M X
T
s:t: pt 0( t ) + Pt 0Xt 6
xm yt
t=1 m=1 t=1

Intuitively, this condition requires that the chosen consumption path e¤ec-
tively turns out (ex post) to be Pareto e¢ cient for the given (…xed) bargaining
weights m .
The revealed preference approach checks whether it is possible to conceive
utility functions um that make observed behavior (captured by the set S)
consistent with the condition (FC). If this is the case, then we say the set S
is Full Commitment (FC)-rationalizable.

De…nition 1 Consider a data set S = fpt ; Pt ; qt ; Qt jt = 1; :::; T g and a

speci…cation of m (m = 1; :::; M ). The set S is FC-rationalizable if there
exist utility functions um , bargaining weights m , and private consumption
XM
bundles qm N
t 2 R+ , with qmt = qt , such that each q1t ; :::; qM
t ; Qt
m=1
satis…es (FC).

This condition will form the basis for de…ning our revealed preference
characterization of the full commitment model in Section 3.

6
2.2 No commitment
The crucial feature of the full commitment model is that the bargaining
weights are held …xed over all periods, i.e. mt =
m
for all t. In the no com-
m
mitment model, we have that t may vary over time periods t. Intuitively,
this means that the partners can update their negotiated relative bargaining
power after every period. Hence, they can incorporate all new available infor-
mation on Z. Thus, in contrast to the full commitment model, the variation
in Z over time periods t does become important.
Similar to before, under no commitment the household chooses for each
t 2 f1; :::; T g bundles qm
t and Qt that satisfy the following condition:

X
M X
T
m t 1 m
q1t ; :::; qM
t ; Qt 2 arg max t
m
m u (xt ; Xt ) (NC)
x1t ;:::;xM
t ;Xt m=1 t=1

X
T X
M X
T
s:t: pt 0( t ) + Pt 0Xt 6
xm yt
t=1 m=1 t=1

The intuition of this condition is the same as the one of condition (FC),
except that now the bargaining weights m t can vary depending on t.
We can then de…ne our condition for the set S to be No Commitment
(NC)-rationalizable.

De…nition 2 Consider a data set S = fpt ; Pt ; qt ; Qt jt = 1; :::; T g and a

speci…cation of m (m = 1; :::; M ). The set S is NC-rationalizable if there
exist utility functions um , bargaining weights mt , and private consumption
XM
bundles qm N
t 2 R+ , with qmt = qt , such that each q1t ; :::; qM
t ; Qt
m=1
satis…es (NC).

In Section 3, this condition will form the basis for characterizing the no
commitment model in revealed preference terms.

2.3 Why commitment tests?

Obviously, the condition for NC-rationalizability in De…nition 2 is less strin-
gent then the condition for FC-rationalizability in De…nition 1. The revealed
preference conditions in Section 3 will allow us to test data consistency with
the full commitment and the no commitment model. If a data set passes

7
the NC-rationalizability condition but not the FC-rationalizability condition,
then this means that the observed behavior can be modeled as Pareto e¢ -
cient for the life cycle consumption model under consideration, but not under
the assumption of constant bargaining weights (i.e. m t =
m
). In this case,
we empirically reject commitment within the household under consideration.
As discussed in Mazzocco (2007) such a test of commitment can have
particular policy relevance. To see this, we recall that if consumers behave
according to the full commitment model, then unanticipated variation in the
distribution factors Z will not impact on the household consumption path.
As such, a public policy change that aims at in‡uencing household behav-
ior via the distribution factors is ine¤ective. To be more precise, we must
make the distinction between anticipated and unanticipated policy changes.
If household members anticipate a particular policy change (e.g. a change
in divorce legislation at period t > 1), then they will take this information
into account when de…ning the m at t = 1. On the other hand, if some
policy measure is unanticipated, then the household cannot respond by rene-
gotiating the bargaining weights. We conclude that only anticipated policy
changes e¤ectively impact on the household consumption (via the bargaining
weights) in the full commitment model.
The picture is very di¤erent for the no commitment model. If consumers
behave in accordance with this model (while the data reject full commit-
ment), then policy changes do become an e¤ective tool for in‡uencing house-
hold consumption behavior. In this case, even an unanticipated policy change
can be taken into account during the renegotiations after the exogenous
shock. Thus, policy makers can now exert more control over the decision
process inside households by (unanticipated) changes of Z.

3 Revealed preference characterization

This section develops revealed preference conditions that are equivalent to
the conditions of the full commitment model in De…nition 1 and the no
commitment model in De…nition 2. Essentially, these revealed preference
characterizations will allow us to empirically test data consistency with the
two models while avoiding a prior speci…cation of the utility functions um
and the bargaining weights m (full commitment) and m t (no commitment).

8
3.1 Full commitment
The following result gives the nonparametric characterization of the full com-
mitment model.

Proposition 1 Consider a data set S = fpt ; Pt ; qt ; Qt jt = 1; :::; T g and a

speci…cation of m (m = 1; :::; M ). The following conditions are equivalent:
(i) The set S is FC-rationalizable: PM
(ii) There exist prices Pm K
t 2 R+ with
m m
m=1 Pt = Pt , quantities qt 2 R+
N
PM
with m=1 qm m
t = qt , and numbers ut > 0 such that the following condition
holds for all s; t 2 f1; :::; T g and m 2 f1; :::; M g:
1
um t 6
um [(pt 0qm m
s t 1 s + Pt 0Qs ) (pt 0qm m
t + Pt 0Qt )]
m

Condition (ii) in this proposition characterizes FC-rationalizability in

terms of so-called Afriat inequalities (see Varian, 1982; based on Afriat,
1967). Our collective model implies that we get a set of Afriat inequali-
ties for each member m. Intuitively, for each observation t and member
m, these inequalities de…ne a utility level um t , which can be interpreted as
m m m m
ut = u (qt ; Qt ). The prices Pt then express the marginal willingness to
pay of each member m for the publicly consumed quantities Qt . They can be
interpreted
PM asmLindahl prices since they must add up to the observed prices
(i.e. m=1 Pt = Pt ). Cherchye, De Rock and Vermeulen (2007, 2009a)
use a similar concept of Lindahl prices for the public goods in their revealed
preference characterization of the ‘static’collective consumption model.
The characterization in condition (ii) is particularly attractive from a
computational point of view. For a given speci…cation of m , it implies a
set of inequalities that are linear in terms of the unknowns Pm m m
t , qt and ut .
Thus, an operational test of the full commitment model can use standard
linear programming techniques to verify the inequalities.
As a …nal remark, we can relate the characterization in Proposition 1 to
the revealed preference characterizations of Browning (1989) and Crawford
(2009), who focused on unitary intertemporal consumption. These authors
characterize rational intertemporal behavior in terms of so-called cyclical
monotonicity conditions. It is easy to verify that condition (ii) in Proposition
1 can equally be expressed in terms of such cyclical monotonicity conditions;
in this case, we will get such a condition for each m. Interestingly, these
cyclical monotonicity conditions will also imply a set of linear inequalities,

9
which can thus be checked through linear programming. However, the veri-
…cation of these conditions is computationally more complex than checking
the Afriat inequalities in Proposition 1. Essentially, for a given data set the
number of cyclical monotonicity inequalities will generally be (often substan-
tially) higher than the number of Afriat inequalities. Therefore, we choose
to focus on the Afriat inequalities in this paper.

3.2 No commitment
Let us then provide the nonparametric characterization of the no commit-
ment model.
Proposition 2 Consider a data set S = fpt ; Pt ; qt ; Qt jt = 1; :::; T g and a
speci…cation of m (m = 1; :::; M ). The following conditions are equivalent:
(i) The set S is NC-rationalizable: PM
(ii) There exist prices Pm K
t 2 R+ with
m m
m=1 Pt = Pt , quantities qt 2
P M m
RN+ with
m m
m=1 qt = qt , and numbers t ; ut > 0 such that the following
condition holds for all s; t 2 f1; :::; T g and m 2 f1; :::; M g:

t 6
m
um
s um t [(pt 0qm m
s + Pt 0Qs ) (pt 0qm m
t + Pt 0Qt )]

Thus, we get a characterization in terms of Afriat inequalities that is

closely similar to the characterization of the full commitment model in Propo-
sition 1. The only di¤erence in the Afriat inequalities is the replacement of
t 1
the given 1= m by the unknown m t . The main implication is that the Afriat
inequalities in Proposition 2 are no longer linear in terms of unknowns (in
m
casu Pm m m
t , qt , t and ut ). This makes it di¢ cult to directly verify these
Afriat inequalities for a given set S.
However, the Afriat inequalities in Proposition 2 are exactly the ones
that apply to the static collective model studied by Cherchye, De Rock and
Vermeulen (2009a). These authors have shown that their conditions can
equivalently be formulated in terms of mixed integer programming (MIP)
constraints, which can be checked through standard MIP techniques. Essen-
tially, they build on the well-known equivalence between the Afriat inequali-
ties conditions that we consider here and the so-called Generalized Axiom of
Revealed Preference (GARP) introduced by Varian (1982). Given this, we
conclude that the nonlinear Afriat inequalities in Proposition 2 can equiva-
lently be expressed in MIP terms. In turns, this implies operational tests for
data consistency with the no commitment model.

10
 One further remark relates to this formal similarity between the intertem-
poral Afriat inequalities in Proposition 2 and the static Afriat inequalities
considered by Cherchye, De Rock and Vermeulen (2009a). This may appear
somewhat paradoxical given the intrinsically di¤erent de…nition of the struc-
tural decision problems that underlie the two models. The interpretation
pertains to the very nature of the no commitment model under considera-
tion. As explained above, the no commitment model accounts for the possi-
bility that the member speci…c bargaining weights change discretely between
every two periods t and t + 1. Intuitively, this possibility of (unanticipated)
bargaining power shifts make it irrelevant to take into account intertemporal
considerations when deciding upon the consumption at any period t. There-
fore, the intertemporal optimization model generates empirical restrictions
that coincide with the ones of the static model, which e¤ectively abstracts
from intertemporal consumption relations.
Admittedly, the assumption of discrete variation in the bargaining weights
between any two periods is a strong one. Indeed, it may often be reasonable to
assume a constant bargaining weight for at least a subset of periods. In fact, a
similar quali…cation applies to the full commitment model: when the number
of periods T gets large, it is often unrealistic to assume exactly the same
bargaining weight in all periods t. Therefore, in the next section we will also
discuss the possibility of considering intertemporal collective consumption
models that are situated between the two extreme (full commitment and no
commitment) models.

4 Empirical application
We have introduced revealed preference conditions that allow for empirically
testing data consistency with the intertemporal collective consumption model
under full commitment and under no commitment. This e¤ectively obtains a
test of commitment, and we have argued that such a test has particular pol-
icy relevance. Practical applications that use these conditions complement
existing empirical studies that have focused on revealed preference analysis
of household consumption behavior in terms of the static collective consump-
tion model, which abstracts from intertemporal consumption behavior. See
Cherchye, De Rock, Sabbe and Vermeulen (2008) and Cherchye, De Rock
and Vermeulen (2009a,c) for empirical studies of the static model that make
use of a demand panel drawn from the Russian Longitudinal Monitoring Sur-

11
vey (RLMS). The application in this paper will draw on the same data set
to assess the empirical performance of the intertemporal collective models
under consideration.

4.1 Data
The Russian Longitudinal Monitoring Survey is an extensive panel data set
containing detailed consumption expenditure data of various categories of
commodities for a large sample of households. We focus on two-person house-
holds (M = 2). Every household in our sample is observed for eight non-
consecutive years ranging from 1994 until 2003, with missing data points for
1997 and 1999. In order to abate the concern of the non-separability between
consumption and leisure (see, e.g., Browning and Meghir (1991)), couples are
excluded from the sample if not every member is employed. These selection
criteria result in an overall sample of 148 couples.
The commodity bundle under consideration consists of 21 nondurables.
It comprises (1) food outside the home, (2) clothing, (3) car fuel, (4) wood
fuel, (5) gas fuel, (6) luxury goods, (7) services, (8) housing rent, (9) bread,
(10) potatoes, (11) vegetables, (12) fruit, (13) meat, (14) dairy products, (15)
fat, (16) sugar, (17) eggs, (18) …sh, (19) other food items, (20) alcohol and
(21) tobacco. Throughout our empirical exercises, we will assume that wood
fuel, gas fuel and housing rent represent public consumption, while all other
goods are assumed to be private. Real prices (pt ; Pt ) have been discounted
using compound real interest rates in Russia obtained from Thomson Reuters
Datastream, taking into account the two years with lacking data. See Cher-
chye, De Rock and Vermeulen (2009a,c) for a more detailed discussion of the
data (including our selection of private and public goods).

4.2 Results
Intertemporal collective rationality is tested for each household separately,
thereby avoiding preference homogeneity assumptions across households. This
subsection describes the setup of the testing phase and the results for the
commitment models discussed in Section 3. Given the disparity in the em-
pirical results of these two extreme (full commitment and no commitment)
models, we will conclude the section with an introductory discussion on an
intermediate ‘limited’commitment model.

12
4.2.1 No commitment
It was already stated in Section 3 that the revealed preference implications
of the no commitment model are identical to those of the static collective
model. In this respect, Cherchye, De Rock and Vermeulen (2009a) found
that all households are consistent with the static collective model for the data
under study. Thus, we conclude that the data also satisfy the intertemporal
collective model that assumes no commitment; the pass rate is 100%.
However, to adequately test the empirical validity of the model, one
should complement the testing exercise with a power analysis. For a given
data set, such a power analysis quanti…es the probability of detecting be-
havior that is not consistent with the model subject to testing. Evidently,
a high pass rate has little value if the model is hard to reject empirically,
i.e. the model has low discriminatory power. We refer to Bronars (1987)
and Andreoni and Harbaugh (2006) for detailed discussions on power issues
related to revealed preference tests such as ours.
In this respect, we can again refer to Cherchye, De Rock and Vermeulen
(2009a). These authors show that the discriminatory power tends to be
rather low for the static collective model that is empirically equivalent to
the no commitment model under study.9 As argued by Beatty and Crawford
(2009), this puts the pass rate of 100% somewhat into perspective.

4.2.2 Full commitment

Let us then consider the full commitment model. Conditional on the discount
factors m , the characterization in Proposition 1 implies a set of inequalities
that is linear in the unknowns (um , Pm m
t , qt ). Together with the linear
aggregation constraints on public good prices and private good quantities,
FC-rationalizability can thus be tested by a standard linear programming
algorithm. However, in our application the value of m is not given prior
to the analysis. To solve this problem, we perform a double grid search
procedure, which allows the discount factors for the two individuals ( 1 and
9
To be more precise, Cherchye, De Rock and Vermeulen concluded that the static col-
lective consumption model has reasonable discriminatory power if assignable information
is available for the privately consumed quantities. If no such assignable quantity informa-
tion is available, however, then power turns out to be rather low. The no commitment
model under consideration complies with the static model without assignable quantity
information.

13
 2) to vary discretely between 0.50 and 1 (with steps of 0.01). This requires
solving about 2600 linear programs per household.10
The tests show that the full commitment model is rejected for all 148
couples, i.e. no household behavior is FC-rationalizable. These results are
robust for any values of 1 and 2 that we consider. Given the data set under
consideration, this should not be very surprising. The underlying assumption
that the relative bargaining weights can be fully predetermined over a time
span of 10 years (with 8 observations) is indeed a very demanding premise.
From these results , we can conclude that full commitment is not a very re-
alistic working assumption for real-life situations with a constantly changing
environment. Similarly, Browning (1989) rejected perfect foresight over the
entire time horizon when testing the nonparametric unitary life-cycle model.
The results also suggest that the collective model with full commitment has
substantial power, which contrasts with our …ndings for the no commitment
model. We see a more detailed power analysis of the full commitment model
under consideration as an interesting avenue for further research.

4.2.3 Limited commitment

The above results indicate that neither of the two extreme (full commitment
and no commitment) models provides a completely satisfactory description
of observed couples’ behavior: the no commitment model has little power,
and the full commitment model is …rmly rejected. This section provides a
…rst exploration of an intermediate collective model that puts more structure
on the data than the no commitment model but less structure than the
full commitment model. Speci…cally, we consider a ‘limited’ commitment
model that focuses on continuous subsets of periods that satisfy the full
commitment restrictions.11 The interpretation is that the bargaining weight
is held constant within these subsets of periods while it can vary between the
subsets. Intuitively, the model assumes that households can only commit for
a limited period of time.
10
As already stated in Section 2, Browning (1989) assumes = 1 when testing the
unitary life-cycle model. Next, Crawford (2009) considers a grid search procedure with
ranging from 0.95 to 1, but the tests are run on quarterly instead of yearly data. When
compared to these studies, we may safely conclude that our analysis is quite ‡exible by
considering the range 0.5 - 1.
11
A similar model was considered by Browning (1989) in his revealed preference analysis
of the life cycle consumption model for the unitary context.

14
 Table 1 presents pass rates for this limited commitment model. It reports
the number (# pass) and percentage (% pass) of households that satisfy the
commitment restrictions for the …rst consecutive T periods, starting from
period 1 (1994). The column with heading T = 8 corresponds to the full
commitment model, which has been discussed before. As indicated above,
the pass rate for this model is zero. We see that relaxing the constancy of the
bargaining weight leads to ever increasing pass rates, up to the point where
the model is no longer rejectable if T = 1.
Generally, the results in Table 1 suggest that intermediate models situated
between the full and no commitment models can be useful for empirical
analysis of collective consumption behavior. First, we …nd that the degree of
commitment (measured by the number of consecutive periods for which full
commitment holds) can vary substantially across households. Subsequent
research may relate this variation to di¤erences in the distribution factors Z
across households. Next, our results also indicate that limited commitment
models may have reasonable power. For example, we …nd that only about
43% of all households satisfy the model restrictions for T = 2, and the pass
rate decreases quite rapidly for higher T .

Table 1 : Limited commitment over the …rst T periods (couples)

Periods T = 8 T = 7 T = 6 T = 5 T = 4 T = 3 T = 2 T = 1
# pass 0 1 5 11 37 47 63 148
% pass 0 0.68 3.38 7.43 25 31.8 42.6 100

5 Summary and conclusions

We have developed a revealed preference methodology for analyzing house-
hold behavior in terms of collective models that account for intertemporal
consumption relations. By focusing on Mazzocco’s (2007) concept of com-
mitment, we have provided revealed preference tests for the full commit-
ment model and the no commitment model. These tests are intrinsically
nonparametric, i.e. they avoid imposing (typically nonveri…able) paramet-
ric/functional structure for the household decision process. We have argued
that comparing the test results for the two model speci…cations can be useful
from a policy perspective.
We have applied our methodology to panel data drawn from the Russian
Longitudinal Monitoring Survey (RLMS). For these data, we conclude that
the no commitment model is not rejected but has low discriminatory power.

15
By contrast, the more powerful full commitment model is rejected for all
households in our sample. Given this, we also provided a …rst exploration of
an intermediate ‘limited’commitment model that is situated between the two
extreme (full commitment and no commitment) models. Our results suggest
that this limited commitment model has satisfactory power. In addition,
it can provide a useful basis for analyzing varying degrees of commitment
across households.
Given our results, we see a more extensive revealed preference analysis
of collective models with limited commitment as an interesting avenue for
further research. In doing so, one may also think of enriching the model
speci…cation by adding intertemporal aspects such as habit formation or ra-
tional addiction. Crawford (2009) has provided a revealed preference analysis
of these aspects in a unitary setting.

Appendix 1: Proof of Proposition 1

(i) ) (ii): Suppose condition (i) of Proposition 1 holds for the allocation
q1t ; :::; qM
t ; Qt , with t 2 f1; :::; T g. Let denote the Lagrange multi-
plier associated with the household budget constraint. We get the following
…rst order constraints form the householdm optimization problem under FC-
@u (qm
t ;Qt ) @u (qm
t ;Qt )
rationalizability (with @qm
and @Qt
(m = 1; :::; M ) the subgra-
t
m m
dients for the function u at bundle (qt ; Qt )):

@um (qm
t ; Qt ) 1
6 t 1 pt ; and
@qmt m
m

X
M m
(qm
m t 1 @u t ; Qt )
m 6 Pt .
m=1
@Qt

Under concavity of the individual utility functions um , we have

@um (qm
t ; Qt ) @um (qm
t ; Qt )
s ; Qs ) u (qt ; Qt ) 6
um (qm m m
0(qm
s qm
t )+ 0(Qs Qt )
@qmt @Qt

16
 Now de…ne for each t
m m
t 1 @u (qm
t ; Qt )
Pm
t = m , m = 1; :::; M 1,
@Qt
MX1
PM
t = Pt Pm t , and
m=1
m
= m
, m = 1; :::; M:

Then we obtain
1 1
um (qm
s ; Qs ) um (qm
t ; Qt ) 6 t 1
m
pt 0(qm
s qm
t )+ t 1
m
Pm
t 0(Qs Qt )
m m
()
1
um (qm
s ; Qs ) um (qm
t ; Qt ) 6 t 1
m
[(pt 0qm m
s + Pt 0Qs ) (pt 0qm m
t + Pt 0Qt )]
m

m
Using um (qm
s ; Qs )= = um
s , this gives condition (ii) of Proposition 1.

(ii) ) (i): Suppose condition (ii) of Proposition 1 holds. De…ne

s 1
um (xm ; X) = min um
s + m [ps 0(x
m
qm
s ) + Ps 0(X Qs )]
s

Varian (1982) has shown that um (qm m

t ; Qt ) = ut .
m
Then consider any consumption path xt ; Xt such that

X
T X
M
[pt 0(xm
t qm m
t ) + Pt 0(Xt Qt )] 6 0;
t=1 m=1

then we need that

X
M X
T
1 X
M X
T
1
1 u (xt ; Xt ) 6
m m m m m m
t t 1 u (qt ; Qt )
m=1 t=1 m m=1 t=1 m

17
 By de…nition, we have that

X
M X
T
1
m m m
t 1 u (xt ; Xt )
m=1 t=1 m

XM X
T
1
6 m
t 1 um
t +
t 1 m
m [pt 0(xt qm
t ) + Pt 0(Xt Qt )]
m=1 t=1 m

m
Without losing generality, we concentrate on = 1 for every m = 1; :::; M ,
which obtains
X
M X
T
1
m m m
t 1 u (xt ; Xt )
m=1 t=1 m

XM XT
1 X
M X
T
6 m m
t 1 ut + [pt 0(xm
t qm
t ) + Pt 0(Xt Qt)]
m=1 t=1 m m=1 t=1
XM XT
1 m
6 m
t 1 ut
m=1 t=1 m

Since um (qm m
t ; Qt ) = ut , we obtain that condition (i) of Proposition 1 is
satis…ed.

Appendix 2: Proof of Proposition 2

(i) ) (ii): Suppose condition (i) of Proposition 2 holds for the allocation
q1t ; :::; qM
t ; Qt , with t 2 f1; :::; T g. Again, we let denote the Lagrange
multiplier associated with the household budget constraint, so that we get
@um (qm
t ;Qt ) @um (qm
t ;Qt )
the …rst order constraints (with @qm
and @Qt
(m = 1; :::; M ) the
t
m m
subgradients for the function u at bundle (qt ; Qt ))

@um (qm
t ; Qt ) 1
6 pt , and
@qmt
t 1
m
m
t
X
M m
(qm
m t 1 @u t ; Qt )
t m 6 Pt :
m=1
@Qt

18
 Next de…ne for each t
m m
t 1 @u (qm
t ; Qt )
Pm
t = m , m = 1; :::; M 1,
@Qt
MX1
PM
t = Pt Pm t , and
m=1
m
t = m
, m = 1; :::; M:
t

Like before, we can use concavity of the utility functions um to obtain

um (qm
s ; Qs ) um (qm
t ; Qt ) 6 m m
t pt 0(qs qm
t )+
m m
t Pt 0(Qs Qt )
()
um (qm
s ; Qs ) um (qm
t ; Qt ) 6 m
t [(pt 0qm m
s + Pt 0Qs ) (pt 0qm m
t + Pt 0Qt )]

Using um (qm m
s ; Qs ) = us obtains condition (ii) of Proposition 2.

(ii) ) (i): Similar to before, we de…ne

s 1 m
um (xm ; X) = min um
s + m s [ps 0(x
m
qm
s ) + Ps 0(X Qs )] ;
s

with um (qm m
t ; Qt ) = u t .
We again consider xm t ; Xt such that

X
T X
M
[pt (xm
t qm m
t ) + Pt (Xt Qt )] 6 0
t=1 m=1

In this case, we need

X
M X
T
1 X
M X
T
1
m
t t 1u
m
(xm
t ; Xt ) 6 m
t t 1u
m
(qm
t ; Qt ):
m=1 t=1 m m=1 t=1 m

m 1
Without losing generality, we concentrate on t = m . Then we obtain
t
by de…nition that

19
 X
M X
T
1 m m m
t 1 t u (xt ; Xt )
m=1 t=1 m

XM X T
1
6 t 1
m
t um
t +
t 1 m
m
m
t [pt 0(xt qm
t ) + Pt 0(Xt Qt )]
m=1 t=1 m

XM X T
1 X
M X
T
6 t 1
m m
t ut + [pt 0(xm
t qm
t ) + Pt 0(Xt Qt )]
m=1 t=1 m m=1 t=1
XM X T
1
6 t 1
m m
t ut :
m=1 t=1 m

Since um (qm m
t ; Qt ) = ut , we obtain that condition (i) of Proposition 2 is
satis…ed.

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