Abstract
The household structure is endogenous. In equilibrium, no individual wishes to exercise one of the available outside options. Under the exit option, a consumer belonging to a multi-member household can decide to leave that household and become single. With the joining option, an individual can leave its current household—or cease to be single, if applicable—and join another, already existing household. Active commodity markets can impede the existence and optimality of a competitive equilibrium with endogenously formed households.
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In equilibrium, commodities clear and households are stable.
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Market clearing and household stability cannot always be achieved simultaneously.
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Stronger stability requirements need not yield stronger welfare conclusions. But the most stringent requirement does.
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Gersbach, H., Haller, H. (2017). General Equilibrium with Endogenous Household Structure. In: Groups and Markets. Springer, Cham. https://doi.org/10.1007/978-3-319-60516-6_7
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DOI: https://doi.org/10.1007/978-3-319-60516-6_7
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