Revealed Preference Analysis of Household Consumption under Risk

We develop a nonparametric approach to analyzing collective household consumption behavior under risk when there is one private commodity in each state of nature. We assume that each household member complies with expected utility theory and is risk averse, and the intrahousehold decision process produces Pareto efficient outcomes. We show how to test data for consistency with this model, recover the individual preferences and the intrahousehold decision process, forecast a household's demand behavior, and quantify the extent of a household's departure from collective rationality. All these questions can be settled by solving a finite number of systems of linear inequalities.