How Do Families Make Decisions?

1. How Do Families Make Decisions?

2. Outline • A central economic unit of society • A command economy • Theories: • Single decider and pooled-income • Bargaining model

3. The Household: • Residential unit • Linked biologically or by marriage • The Family is: • “An economy in microcosm, a system of exchanges, entitlements, and responsibilities allocated among members in a group whose boundaries are far from clear” (Rogers, 1990)

4. How Families Make Decisions

5. Single-Decider, Pooled-Income • 1st major model (Becker) • Nobel Prize • Maximizes single utility • Altruistic Dictator • One common budget restraint, • Pooling of resources

6. Does This Seem Like Your Family?

7. Bargaining Model • More than one utility function • (His and Hers) • Interdependent but non-cooperative • Income level  leverage • Threat points

8. The Utility Possibility Frontier

9. Threat Points

10. Which Model Works Best? • UK family allowances • Who moves for work • Charity patterns

11. The Bargaining Model!

13. THE END