Abstract
Most analysis of intrahousehold decisions has been conducted using aggregate revealed preference data where preferences of individual agents are never observed, only the household consumption outcomes are observed. We examine household behavior in a bargaining framework by combining stated preference information from individual members of the household with revealed preference information on the household’s actual choices. The resulting model provides information on the degree to which the decision is the result of a bargaining process as well as information on the factors affecting bargaining power.
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Notes
In the formulation of the bargaining model we do not explicitly consider a household public good. Rather the choice of which alternative to visit is assumed to be a form of household public good that offers utility to each member of the household. In this formulation we assume that the partners both participate in the chosen option. Furthermore, we assume that the stated preference information collected represents the individual’s preferences and not their estimate of some household preference.
Our approach does not include altruism, a potentially important component of vacation choice decisions. One way to represent altruism is to include the other partner’s preferences, weighted by a parameter, in the indirect utility function of the individual. For example \({V}_{i}^{\rm m}={x}_{j}{\beta}^{\rm m}+{a}^{\rm m} {x}_{j}\beta^{\rm f}\) is one representation of altruism for the male partner. A similar representation for the female partner could be assumed. In this case, our estimated parameters are actually estimates of (βm+amβf) for the male and (βf+afβm) for the female. Since our stated preference questions ask about the household vacation, these types of preferences apply and thus one could interpret our estimated site choice preference parameters as capturing altruism as well as individual preferences. We thank an anonymous reviewer for providing us with this illustration.
Demographics are interacted with the attributes to incorporate heterogeneity into the model and allow some differentiation between households. If there were no interactions then all individuals (men, women in the separate sub-samples) would be assumed to have the same preferences. Including income as one of the demographic elements used as interactions has been raised as a concern when one in computing welfare measures, however, Morey, Sharma, and Karlstrom (2003) illustrate the options for computing welfare measures in such cases.
It is possible that scale effects in the conditional logit model are confounded with the power factors estimated in the process. That is, what appears as differences in bargaining weights may in fact be differences in scale or error variance between the men and women in the household. Accounting for such effects in the conditional logit model would require individual and household specific scale factor estimation––an estimation process that would likely be difficult if not impossible to achieve. In the mixed logit model individual and household specific difference are captured by the use of the panel data estimator and the use of the estimates of individual tastes. However, the potential for scale effects confounded with these estimates remains. We thank Mark Morrison for pointing out this issue.
If there is enough variation between the preference structures and in the power variable, δ, δ as a function of household characteristics can be determined jointly with the estimation of the individual preference parameters by maximum likelihood. However, our data did not have sufficient variation to develop these estimates, thus we used this two-step procedure and estimated the δs by a grid search.
An important caveat about our approach is that we examine household bargaining and power for a specific good. As such we implicitly assume a form of separability that allows us to examine this decision in isolation of prices of other goods. We also expect that power and bargaining structure can vary by the good being examined and that our decision weights will not carry over to other decisions. A higher level bargaining and allocation process is assumed to exist that generates the separable components of demand and the differentiated bargaining cases.
As a shared good, the vacation decision is preferable as a focus of analysis to either durable goods or smaller goods that are purchased more frequently. Though individuals could have strong preferences over durable goods, such as the purchase of a vehicle, these purchases occur too infrequently for this type of analysis. Smaller, more frequently purchased goods, such as groceries, are inappropriate because individuals may not hold strong enough preferences for particular brands of goods.
The question stated: “The following tables describe imaginary campgrounds and will help us understand what trade-offs you make choosing a camping area. Imagine that you are planning a camping trip and these are the only sites available as all other sites are closed. As an individual, choose which option you would prefer if you had the final say and check the appropriate box.”
This park is on the southern fringe of the boreal forest and offers 20 different campgrounds, with each campground offering a different set of services to the visitors ranging from “no trace” to full-service camping (Tourism Saskatchewan, 1999). The fact that there is a range of camping services in this provincial park allowed the researcher access to campers who have different types of preferences for a range of camping facilities and activities.
An additional reason to collect responses from both partners is that there is growing literature on household decision making that demonstrates that there are often large discrepancies in their responses, so that relying on one partner could result in biased results (Blumberg & Coleman, 1989).
The parameter estimates are actually μβ, where μ is the scale and β is the true parameter (Swait & Louviere, 1993). To be able to discuss the parameters without the confounding effect of the scale, marginal rates (βi/β$) are used.
To examine these assumptions we estimated a number of specifications and limited the sample to only couples who were both working and found that the signs and sizes of the coefficients on income (and income squared where relevant) or on female share of income are very similar to those in the regressions presented in Tables 6 and 9, but are not significant. We suspect this is due to the small sample size and not the lack of a relationship between these factors.
As a check on the properties of the estimates of individual coefficients versus the models with demographic interactions, the individual coefficient estimates were regressed on the gender and other demographic variables. The results were not strongly significant, but relationships like the preference of females for higher quality facilities were revealed by this examination.
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Dosman is a Research Associate and Adjunct Professor, Department of Human Ecology, University of Alberta. Adamowicz is Canada Research Chair and Professor, Department of Rural Economy, University of Alberta. Funding for this research was provided by the Social Sciences and Humanities Research Council (SSHRC), Canada. This work was completed during the time Adamowicz was a Gilbert White Visiting Fellow, Resources for the Future, Washington DC. He gratefully acknowledges their support. The authors would like to thank 2 anonymous reviewers, Mark Morrison and participants at a seminar at Resources for the Future for their helpful comments on this paper.
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Dosman, D., Adamowicz, W. Combining Stated and Revealed Preference Data to Construct an Empirical Examination of Intrahousehold Bargaining. Rev Econ Household 4, 15–34 (2006). https://doi.org/10.1007/s11150-005-6695-1
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DOI: https://doi.org/10.1007/s11150-005-6695-1