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Love And Money: Experimental Tests Of Theories Of The Household.

Love And Money: Experimental Tests Of Theories Of The Household. Ian Bateman,* Tara McNally** and Alistair Munro ** *University of East Anglia, Norwich, UK ** Royal Holloway College, University of London. http://personal.rhul.ac.uk/UQTE/003/Couples.htm. What are we testing?.

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Love And Money: Experimental Tests Of Theories Of The Household.

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  1. Love And Money: Experimental Tests Of Theories Of The Household. Ian Bateman,* Tara McNally** and Alistair Munro***University of East Anglia, Norwich, UK ** Royal Holloway College, University of London. http://personal.rhul.ac.uk/UQTE/003/Couples.htm

  2. What are we testing? • Theories of the household, notably: • Income pooling – does the source of income affect choices? • Pareto efficiency • Unitary models • (theories of risky choice) • Altruistic behaviour

  3. What do we do? • We • Recruit established couples • Separate them • Make them do choices separately • Most of these choices involve gambles… • E.g. £20 for me versus a 60% chance of £40 for my partner • We make them predict their partner’s choices • Re-unite couples and face them with joint choices. • Pick one of their 36 choices at random and make them play it out.

  4. Subjects enter, allocated ‘wave’ or ‘triangle role. Sub-groups separated Triangles: Individual choice. Questions 1...n Waves: Individual choice Questions n+1...2n Section 2: Prediction, Questions n+1...2n Section 2: Prediction, Questions 1...n Groups merge, Joint choice Questions 2n+1...3n One question chosen at random, choice executed, payoffs How do we run the experiment?

  5. Example task & test

  6. Treatment 1 (n=76), separated couples in different rooms, no revelation of answers to partner; private and separate payouts in sealed envelopes. These facts pre-announced Treatment 2 (n=40) Separated couple in same room All answers available to partner Payments made in front of partner These facts pre-announced Does information matter?

  7. Within and between task tests for consistency with Income Pooling

  8. Income Pooling. Typically… • cannot reject income pooling for joint choice • Pattern of deviations consistent with inequality aversion • For separated choice • Reject income pooling for separated choice • Pattern of deviations consistent with greater weight placed on own payoffs. • Information regime has little impact.

  9. Pareto efficiency • Across a wide range of tasks couples who make the same choice separately, deviate from that choice in joint deliberation • Deviation is systematic – away from risky choices.

  10. Summing up • Strong rejection of unanimous decisions • Rejection of income pooling in separated choice • Widespread deviation from Pareto efficiency • Couples are more risk averse than the individual partners • Results are robust to information disclosure rule • Though some evidence that women are less risk averse with information disclosure • Suggestion is that standard household models are inappropriate. • More details on this sequence of experiments at: • http://personal.rhul.ac.uk/UQTE/003/Couples.htm

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