Household Versus Individual Valuation: What’s the Difference?

Standard practice in stated preference typically blurs the distinction between household and individual responses, but without a clear theoretical or empirical justification for this approach. To date there have been no empirical tests of whether values for say a two adult household elicited by interviewing one randomly selected adult are the same as the values generated by interviewing both adults simultaneously. Using cohabiting couples, we conduct a choice experiment field study valuing reductions in dietary health risks. In one treatment a random individual is chosen from the couple and interviewed alone; in the other treatment, both partners are questioned jointly. We find significant differences in household values calculated from joint as opposed to individual responses, with further variation between the values elicited from men and women. Our results question the assumption, implicit in common practice, that differences between individually and jointly elicited estimates of household values can effectively be ignored.      

An Analytical Framework for Joint vs Separate Decisions by Couples in Choice Experiments: The Case of Coastal Water Quality in Tobago

This paper offers an analytical framework for analyzing joint and separate decisions by couples in the context of choice experiments for nonmarket valuation. It reports results from an attribute-based stated preference study in which members of couples are asked to conduct a choice-experiment first individually and then jointly. The choice context was the selection of which beach to visit while on vacation in Tobago. Available alternatives differed in attributes related to coastal water and beach quality such as level of coastal development and fish abundance. Tests of preference equality are reported and structured so as to identify the intra-couple decision-making patterns under taste heterogeneity with both finite and continuous mixed logit. Results from the latter suggest that women’s preferences are found to be predominant in the joint choice-experiment. Results suggest caution in using individual choice rather than joint couple choice when valuing quality changes impacting on couple activities, such as water and beach quality in Tobago, and call for further research on the topic.     

Ethnic divisions,contract choice,and search costs in the Guatemalan land rental market

This paper shows how ethnic diversity in a context of weak property rights enforcement can result in market segmentation. The paper analyzes how contract enforcement problems affect the joint decision of partner and contract choice by landlords in the land rental market in Guatemala. The empirical method allows partner choice to be determined not only by the characteristics and relative scarcity of the specific landowner and tenant, but also by the characteristics of other potential tenants. The results show that landowners without formal title are more likely to restrict their partners to tenants from the same ethnic group. Partner choice is found to be less important for renting with interlinked land–labor contracts.     

A class of solutions to bargaining problems

A reformation of Nash's axiom of Independence of Irrelevant Alternatives is proposed, generalizing an idea due to Roth. It involves the concept of a reference function g, whose purpose is to summarize the main features of the bargaining problem and so facilitate the evaluation of the relative bargaining positions of the players. It is with respect to g that the Independence condition is reformulated. In conjunction with the other axioms used by Nash, it is shown that if g satisfies certain natural properties, the bargaining problem admits of a unique solution. Several examples of reference functions are shown to satisfy these conditions. An existence problem discovered by Roth for a particular choice of g is shown to be resolved if solutions are permitted to be multi-valued, the axioms being correspondingly reformulated.     

Nursing home choice,family bargaining,and optimal policy in a Hotelling economy

We develop a model of family bargaining to study the impact of the distribution of bargaining power within the family on the choice of nursing homes by families, and on the locations and prices chosen by nursing homes in a Hotelling economy. In the baseline (static) model, where the dependent parent cares only about the location of the nursing home, the markup of nursing homes is increasing in the bargaining power of the dependent parent, and nursing homes are located at the extreme periphery. We compare the laissez‐faire with the social optimum (which involves more central locations of nursing homes), and examine its decentralization in first‐best and second‐best settings. We explore the robustness of our results to introducing a bequest motive in a dynamic overlapping generations model, which allows us to study the joint dynamics of wealth accumulation and nursing home prices. If the bequest motive is strong, the markup is decreasing in the bargaining power of the dependent. However, wealth accumulation, by reducing interest rates, raises markup rates and nursing homes prices.     

The Choquet Bargaining Solutions

We axiomatically investigate the problem of rationalizing bargaining solutions by social welfare functions that are linear in every rank-ordered subset of Rⁿ₊ . Such functions, the so-called Choquet integrals, have been widely used in the theories of collective and individual choice. We refer to bargaining solutions that can be rationalized by Choquet integrals as Choquet bargaining solutions. Our main result is a complete characterization of Choquet bargaining solutions. As a corollary of our main result, we also obtain a characterization of the generalized Gini bargaining solutions introduced by Blackorby et al. (1994, Econometrica62, 1161–1178). Journal of Economic Literature Classification Numbers: D71, C78.     

Choice and individual welfare

We propose an abstract method of systematically assigning a “rational” ranking to non-rationalizable choice data. Our main idea is that any method of ascribing welfare to an individual as a function of choice is subjective, and depends on the economist undertaking the analysis. We provide a simple example of the type of exercise we propose. Namely, we define an individual welfare functional as a mapping from stochastic choice functions into weak orders. A stochastic choice function (or choice distribution) gives the empirical frequency of choices for any possible opportunity set (framing factors may also be incorporated into the model). We require that for any two alternatives x and y, if our individual welfare functional recommends x over y given two distinct choice distributions, then it also recommends x over y for any mixture of the two choice distributions. Together with some mild technical requirements, such an individual welfare functional must weight every opportunity set and assign a utility to each alternative x which is the sum across all opportunity sets of the weighted probability of x being chosen from the set. It therefore requires us to have a “prior view” about how important or representative a choice of x at a given situation is.     

Community–Industry Contracting over Natural Resource use in a Context of Weak Property Rights: The Case of Indonesia

Decentralization in Indonesia has resulted in an increased influence of local communities over the terms of logging agreements with timber companies. The outcomes of such community–company negotiations vary significantly across communities. What are the conditions that cause this variation, and how can the outcomes be more effectively and efficiently influenced by third-party actors such as the local government or NGOs? This paper addresses these questions by developing a game-theoretic model to illustrate the strategic interactions between communities and companies. The model allows for endogeneity of de facto property rights and bargaining positions. We show that third-party actions to improve the community’s bargaining position by raising its reservation utility may result in an increase in the area logged and thereby harm the environment. Our results indicate that the strategy of intervention matters. In particular, strategies that raise the sensitivity of interventions to local logging threats are likely to be more cost-effective in supporting communities and reducing forest degradation than more indiscriminatory strategies. The model will be relevant to other situations where communities negotiate contracts over natural resource use with outside actors in a context of weak property rights, a situation increasingly observed in other developing countries.     

The Layoff Rat Race*

We investigate how discretionary investments in general and specific human capital are affected by the possibility of layoffs. After investments are made, firms may have to lay off workers, and will do so in inverse order of the profit that each worker generates. Greater skill investments, especially in specific human capital, contribute more to a firm's bottom line, so that workers who make those investments will be laid off last. We show that as long as workers' bargaining positions are not too weak, workers invest in specific human capital in order to reduce layoff probabilities. Indeed, workers over‐invest in skill acquisition from a social perspective whenever their bargaining power is strong enough, even though they only receive a share of any investment. More generally, we characterize how equilibrium skill investments are affected by the distribution of worker abilities within firms, the probability that a firm will downsize, and the distribution of employment opportunities in the economy.     

Trade Negotiations under Alternative Bargaining Structure

We build a bargaining model, in which a country (leader) decides whether or not to form a free trade agreement with other nations (followers), either through a sequential or a multilateral bargaining procedure. Unlike Aghion et al. ( 2007 , Journal of International Economics, 73, 1–30), in our specification of multilateral bargaining, the leader can collude with all those follower countries who agree to its offer. This has important implications for the choice of sequential and multilateral bargaining by the leader in presence of coalition externalities. Moreover, this bargaining procedure ensures that “stumbling block” equilibrium will never occur.     

Household bargaining and the design of couples’ income taxation

This paper studies the design of couples’ income taxation when consumption and labor supply decisions within the couple are made by maximizing a weighted sum of the spouses’ utilities; bargaining weights are given but specific to each couple. Information structure and labor supply decisions follow the Mirrleesian tradition. However, while the household's total consumption is publicly observable, the consumption levels of the individual spouses are not observable. With a utilitarian social welfare function we show that the expression for a spouses’ marginal income tax rate includes a “Pigouvian” (paternalistic) and an incentive term. The Pigouvian term favors a marginal subsidy (tax) for the high-weight (low-weight) spouse, whose labor supply otherwise tends to be too low (high). The sign and the magnitude of the incentive term depends on the weight structure across couples. In some cases both terms have the same sign and imply a positive marginal tax for the low-weight spouse (who may be female) and a negative one for the high-weight spouse (possibly the male). This is at odds with the traditional Boskin and Sheshinski results. Our conclusions can easily be generalized to more egalitarian welfare functions. Finally, we present numerical simulations based on a calibrated specification of our model. The calculations confirm that the male spouse may well have the lower (and possibly even negative) marginal tax rate.     

Choice of angiotensin receptor blocker in moderate hypertension. A UK-based cost–benefit comparison of olmesartan- and candesartan-based regimens

Abstract

Introduction:

Selection of antihypertensive therapy hinges on an appropriate combination of efficacy, tolerability and compatibility with co-morbidities. Within a given class of antihypertensives, the choice of agent is often driven by cost, with the cheapest appropriate agent being chosen. Amongst the angiotensin receptor blockers (ARBs), this choice will often be losartan, as it is available in generic form. However, as the blood pressure lowering efficacy of losartan is modest, some patients will require an alternative ARB. In the UK this choice is often candesartan, although the agent with greatest BP lowering efficacy is olmesartan. The objective of this study was to use a cost-benefit model to compare the costs associated with target achievement using each of these two agents, in order to guide optimum use of prescribing budgets.

Method:

A probabilistic cost-benefit model was constructed for a cohort of patients with moderate hypertension, based on a standardised titration and maintenance algorithm using either olmesartan or candesartan, combined with thiazide and calcium channel blocker where required. Direct treatment costs were recorded, along with the proportion of patients achieving pre-defined treatment targets at each treatment level. Results were expressed as mean treatment cost per patient reaching target.

Results:

Based on the current QoF target of 150?mmHg systolic, 94.3% of patients on the olmesartan-based regimen reached target of 150?mmHg, compared with 89.0% of those on the candesartan-based regimen. 86% of olmesartan patients reached target on <3 drugs, compared with 74% of candesartan patients. The mean 12-month cost per patient reaching target was £171.36 for olmesartan versus £189.91 for candesartan. Ongoing annual maintenance costs for patients at target were £169.97 and £182.64, respectively. Similar results were obtained when considering alternative treatment targets

Limitations:

The study only compared two ARBs – candesartan and olmesartan and the results relate to prescribing costs only and do not include other healthcare costs. Additionally, the chosen outcome was blood pressure target achievement, rather than clinical endpoints. Given the stated objectives of the model, we do not believe these issues will have introduced bias in the direction of either comparator

Conclusion:

Although olmesartan has an apparently higher acquisition cost than candesartan, its superior BP lowering efficacy means that the overall cost per patient treated to target is actually lower. This result could have significant implications for making savings within primary care prescribing budgets in the UK.     

The Level of Wage Bargaining as a Firm–Union Choice

There is a trade-off between central bargaining which allows local externalities to be internalized and local bargaining which gives firms and unions the scope to determine both wages and employment simultaneously and efficiently in the sense of McDonald and Solow (1981). A model of strong unions is presented where workers are also concerned with relative wages. The trade-off is resolved by the individual firm and union on the basis of choice, using the Pareto-criterion. In the presence of a small extra contract cost under local bargaining, the main findings are: (i) central bargaining is Pareto-optimal only for extreme values of the reservation income level—a change in unemployment remuneration may cause centralization to breakdown; and (ii) centralization may also be sustained as a suboptimal Nash-equilibrium through workers' concern with relative wages—the familiar Keynesian coordination failure.     

The trade-offs from pattern bargaining with uncertain production costs

Pattern bargaining is a negotiating strategy that is often employed by industry-wide unions in oligopolistic industries to set wages. The conventional wisdom is that pattern bargaining “takes labor out of competition” and therefore softens bargaining between the union and firms, resulting in higher industry wide wages. However, this does not explain why firms agree to pattern bargaining. We introduce a model in which the agents face uncertainty about the relative product-market positions of the firms and compare the trade-offs involved in adopting different bargaining mechanisms. We show that with sufficient heterogeneity in non-labor costs, there are situations in which both the union and the firms prefer pattern bargaining. We also show that in such situations, the adoption of pattern bargaining harms consumers. This provides an explanation as to how pattern bargaining can arise in equilibrium and why there is often strong political opposition to it.     

Optimal income taxation when couples have endogenous bargaining power

This study examines the optimal income taxation for a two-earner household, where the couple bargains over their private goods consumption and time allocation between work and leisure. In the model, bargaining power is determined endogenously by the income gap between the two earners. Conventional studies have shown that the higher income tax rate should be imposed on the individual with the smaller wage elasticity, typically the individual with the higher productivity. In contrast to conventional argument, this study shows that the optimal tax rate on the household member with the higher productivity is lower than that of the individual with the lower productivity if the required tax revenue is relatively small and the influence of the gender income gap on the power balance of the couple is moderate. This is because such a tax structure encourages the labor supply of the individual with the higher productivity to mitigate the decrease in the household’s consumption induced by income taxation.     

Joint ownership and interconnection pricing in network industries

This paper investigates a vertical market structure called joint ownership, where a monopolistic upstream firm is jointly owned and operated by competing downstream firms. As such, a common interconnection price to an upstream bottleneck is determined by bargaining among the downstream firms. We show that (1) joint ownership can be superior to the other ownership structures by overcoming vertical externality of double marginalization; (2) collusive outcomes, however, may arise surrounding the setting of common interconnection price; (3) an overall performance of joint ownership depends crucially upon how equity shares are initially distributed and which bargaining rules are employed; and finally (4) a policy measure to promote downstream competition may have ambiguous consequences under joint ownership. Some managerial and political implications in implementing joint ownership in practice are also provided.     

The Ambiguity of Joint Asset Ownership: Cautionary Tales From Uganda and South Africa

ABSTRACT

This study uses individual-level survey data from women and men in Uganda and South Africa to examine coupled women's joint ownership of land and housing. It compares women's control over and benefits from jointly held land and housing with those of coupled women not owning land or housing at all and coupled women owning them solely. The lack of a clear and consistent advantage of joint ownership potentially arises from frequent disagreement within couples about whether the land or house is jointly owned. The study serves as a reminder of the complexities of joint ownership in practice, particularly within families, that need to be considered in order for coupled women to benefit from joint asset ownership. Efforts promoting joint ownership, for example, joint titling and marital property laws supporting joint ownership, should not only consider these complexities but also establish and communicate clear and enforceable rules for joint ownership.     

Post-Earthquake Land Appropriations and the Dispossession of Rural Women in Haiti

ABSTRACT

This study examines the trajectory of rural women’s labor in the wake of post-earthquake land appropriations in Haiti. Drawing on ethnographic field research conducted between 2010 and 2013, it explores gendered access to land in Haiti in both historical and contemporary contexts, paying attention to the nature of rural gender relations and how they influence women’s access to land and their roles in petty commerce. The study describes the stratification of rural market women, their lived experience, and how losing land access will affect their traditional roles as market women. Ultimately it argues that without access to land, and a paucity of available wage work, recent dispossession will intensify existing vulnerabilities for rural women and narrow their means of household production by forcing them to depend on informal market activity in their roles as machann (market women).     

Counter intuitive results in a simple model of wage negotiations

Summary. Short-term contracts and exogenous productivity growth are introduced in a simple wage bargaining model. The equilibrium utilities corresponding to militant union behaviour are independent of the contract length. Necessary and sufficient conditions for monotonic convergence to a unique steady state are derived. Otherwise, cyclic behaviour of wage shares is inevitable. A wage decrease can occur if strike is credible, but never when strike is not credible. In the limit, as time between bargaining rounds vanishes, this paradox survives. Received: September 3, 1998; revised version: February 10, 2000