A general equilibrium model is introduced where a household may consist of several
members, each with individual preferences and/or resources. When households obey
collective rationality, certain intrahousehold externalities can be fully internalized by the
respective households so that competitive exchange among households is efficient. As a
rule, however, such intrahousehold externalities are not fully internalized by individual
household members acting in their personal interest so that competitive exchange among …

With a few exceptions, economic theory as well as empirical research have treated
households as if they were single consumers. As a practical matter, indeed, household
expenditure data commonly used in empirical research may report the composition of
households without disaggregating household consumption (expenditure) and factor supply
(income) with respect to household members. Both from a normative and a positive
perspective, this prevailing practice raises the question whether it makes any difference who …