Consume Now or Later? Time Inconsistency, Collective Choice, and Revealed Preference

We develop a revealed preference methodology that allows us to explore whether time inconsistencies in household choice are the product of individual preference nonstationarities or the result of individual heterogeneity and renegotiation within the household. An empirical application to household-level microdata highlights that an explicit recognition of the collective nature of household choice enables the observed behavior to be rationalized by a theory that assumes preference stationarity at the individual level. The methodology created in this paper also facilitates the recovery of theory-consistent discount rates for each individual within particular household under study. (JEL E24, F13, F16)

Decision-making process of households on food consumption

Decision-making process of households on food consumption is discussed in the post-Keynesian theory of household choice. Since the core assumption of uncertainty is employed, the set of consumption alternatives is restricted to the subset of the known ones. When searching for these alternatives, the consumer faces the search costs expressed by time of search. The sample of Czech households was investigated to ascertain the volume of the search and 57% of households do not seek for any information that are relevant for decision-making on foodstuff purchase. To overcome this activity, the households more likely rely on prices and the range of goods of the closest sellers to them. Searching for information on product is replaced by reliance on habits and recommendations of the others. On the contrary, the uncertainty of real purchase power is of lower significance in food consumption, because the foodstuffs meet the basic physiological needs and dispose of constrained stability in storage. Thus, households cannot always postpone (or bring forward) their consumption. In order to deal with the lack of money, households from lower income levels reduce their expenditures for foodstuffs more often than those from the higher income levels. Consequently, the relationship between the level of income and needs satiation is outlined.