Intra-household bargaining refers to negotiations that occur between members of a household in order to arrive at decisions regarding the household unit, like whether to spend or save or whether to study or work.
Bargaining is traditionally defined in economic terms as the negotiating conditions of a purchase or contract and is sometimes used in place of direct monetary exchange. In its simplest definition, ‘bargaining’ is a socio-economic phenomenon involving two parties, who can cooperate towards the creation of a commonly desirable surplus, over whose distribution the parties are in conflict. [1] Bargaining process within a family is one of the important aspects of family economics. Bargaining also plays a role in the functioning and decision making of households, where agreements and decisions do not often have direct monetary values and affect various members of the household. [2] [3] [4] [5]
These models consider the household as a single decision-making unit with common preferences, which contrasts with bargaining models that acknowledge individual member preferences.Here, the dominant earner or the head of the household is perceived to act selflessly, prioritizing decisions that cater to the well-being of the entire household. The primary decision-maker's happiness is inherently tied to the welfare of the other members. Critics note that this model may overlook intra-household power disparities and potential inequalities.[ citation needed ]
The term "Altruistic Dictator" in the context of Gary Becker's work refers to a theoretical model in household economics where one person, often referred to as a benevolent dictator, controls the household's resources and has altruistic preferences, meaning they care about other family members. [6] This person's utility function includes the preferences of other family members as a normal good. Each household member then maximizes their own preferences subject to their budget constraint set by the benevolent dictator, resulting in the household behaving as one individual. [7]
Becker's model of the altruistic dictator has been used in various economic experiments, such as the Dictator Game. In this game, one individual (the dictator) decides how to distribute a sum of money between themselves and another person (the recipient). This game is used to study the motivations behind people's decisions to redistribute income to others. [8] Becker's model has been influential in shaping research in the economics of the family, despite some criticism. His approach to the family leads to a conclusion that the institutions depicted are benign, and that government intervention would be useless at best and probably harmful . [9]
In the altruist model of intra-household bargaining, the primary earner or household head is presumed to act altruistically, making decisions that they believe benefit the entire household. This model assumes that the happiness or satisfaction of the altruistic member is intrinsically linked to the well-being of all other members. As a result, resources get distributed based on this member's perception of what benefits the household collectively, which may not always align with individual preferences. However, critics argue that the model might neglect potential intra-household power imbalances and inequalities.[ citation needed ]
Bargaining models of divorce focus on the negotiations between spouses during the process of divorce. These models aim to understand how individual preferences, power dynamics, and external factors influence the outcomes of divorce settlements, such as the division of assets, alimony, and child custody arrangements. One example of a bargaining model of divorce is the Nash-bargaining model, which interprets the intra-household allocation of resources as an outcome of bargaining processes among household members, taking into account their individual preferences and outside options. [10] This model can provide valuable insights into the complex dynamics of intra-household resource allocation and decision-making during divorce, capturing the potential influence of individual preferences and bargaining power on divorce outcomes. Another example is the separate spheres bargaining model, which differs from divorce threat bargaining models by considering the distribution of resources within marriage and how it affects the bargaining process during divorce. [11] This model acknowledges that spouses may have different spheres of influence and control over resources within the marriage, which can impact the negotiation process and outcomes during divorce.[ citation needed ]
Critics of these models argue that they may not fully capture the complexities of divorce negotiations, as they often rely on simplified assumptions about individual preferences and power dynamics. However, bargaining models of divorce can still provide valuable insights into the factors that influence divorce outcomes and help inform policies and interventions aimed at promoting fair and equitable divorce settlements. [12]
The Nash-Bargaining Model, as described by McElroy [1990], is a cooperative bargaining model applied to household decision-making. This model is based on the idea that household members negotiate and reach agreements on the allocation of resources, taking into account their individual preferences and outside options [13] [14] [15] Thomas [1990] proposed a test to distinguish between altruism models and the Nash-bargaining model, finding evidence that bargaining may influence allocation within households. In particular, he observed that in households where mothers contribute a larger share of non-labor income, children seem to be better nourished . [16] This suggests that the Nash-bargaining model can provide valuable insights into the complex dynamics of intra-household resource allocation and decision-making, capturing the potential influence of individual preferences and bargaining power on household outcomes. The Nash-bargaining model is considered more realistic than the altruism models as it acknowledges the potential for conflicting interests and preferences among household members. It also allows for the possibility of changes in the distribution of resources within the household based on negotiations between members, rather than assuming a single decision-maker acting in the best interest of the entire household. [17]
The Collective Model of household decision-making, as opposed to the unitary model, assumes that each individual in the household has specific preferences, and the outcome of the decision process is Pareto efficient . [18] This model focuses on the individuality of household members and how individual preferences result in a collective decision. [19] The collective approach has been used to provide theoretical results for various household issues, such as labor supply, consumption and savings, household production, and intra-household allocation. [18] The key idea underlying the Collective Model is that household decisions result from a bargaining process among household members, subject to a household budget constraint. [20] This model allows for a more realistic representation of household decision-making, as it acknowledges the potential for conflicting interests and preferences among household members. It also allows for the possibility of changes in the distribution of resources within the household based on negotiations between members, rather than assuming a single decision-maker acting in the best interest of the entire household. [21] The Collective Model has been applied to various household issues and has provided valuable insights into the complex dynamics of intra-household resource allocation and decision-making. However, it's important to note that while the Collective Model provides a more nuanced understanding of household decision-making, it also requires more detailed data on individual preferences and outside options, which may not always be readily available [18]
Within the household unit and in the mathematical study of game theory, scholars have defined two distinct types of bargaining: cooperative and non-cooperative. [22] [23] In cooperative bargaining models (also called collaborative decision making), the outcomes of negotiations are more equally beneficial to all members of the household, and have therefore been considered a more "natural" means of analyzing the family unit in comparison to Non-cooperative game theory. [24] In non-cooperative bargaining models (also called unitary decision making), personal interests motivate individuals within the household rather than the desire to work in a collaborative manner and maximize the benefit of all household members. [24] [25]
The household is traditionally described as a single economic unit that "works as a group for its own good", meaning all members of the household contribute in an altruistic manner towards the benefit and functioning of the entire household. [26] : 184 [27] [28] The household is "the basic residential unit in which economic production, consumption, inheritance, child rearing, and shelter are organized and carried out". [29] [28] [30] Though it is not always synonymous with family, in the case of intra-household bargaining, in which members of the household are considered to be one unit, the household is generally synonymous. [4]
Because a household is composed of various individuals, conflicts of interest arise. [31] These conflicts of interest make bargaining a necessary part of family life and produce a setting where altruism is not always the guiding principle. [4] [32] These conflicts of interest have the potential to create a spectrum of intra-household dynamics, ranging from a non-cooperative to a cooperative household (which is directly reflective of game theoretic bargaining models). In the non-cooperative model, each household member acts in order to maximize his or her own utility; [33] in the cooperative model, households act as a unit to "maximize the welfare of their members" (described above as altruism). [34]
Bargaining power is "the relative capacity of each of the parties to a negotiation or dispute to compel or secure agreements on its own terms". [35] In its simplest definition, ‘bargaining’ is a socio-economic phenomenon involving two parties, who can cooperate towards the creation of a commonly desirable surplus, over whose distribution the parties are in conflict. [35] In other words, "if both parties are on equal footing in a debate, then they will have equal bargaining power", and, conversely, if one party has an advantageous position in the debate, the parties have unequal bargaining power.
More specifically, what determines the equality or inequality of bargaining power is the relative fallback positions or "threat points" of the individuals in the bargaining process; that is, which bargainer has more to lose (economically, socially, etc.)? [4] In the context of intra-household bargaining, an individual's bargaining power and fallback position are defined by one's ability to survive and thrive outside the family. [4]
The concept of threat point or fallback position is a key component in the field of economics, particularly in the study of household bargaining dynamics. This concept is used to understand the power dynamics within a household, where the individual with a stronger fallback position, or better alternatives, has more bargaining power and influence over decisions. [36] [37] The fallback position refers to the best alternative an individual has if the current cooperative arrangement within the household fails. For instance, a woman with a good income has a stronger fallback position than a woman with no individual earnings. This is because she has better alternatives if the marriage ends, giving her more bargaining power. [37]
In the context of economic society, the concept of threat point or fallback position can be applied to understand the dynamics of power and negotiation within different societal structures, such as households, labor markets, and even countries. It provides a framework for understanding how individuals or groups negotiate and make decisions based on their best alternatives, and how this affects their wellbeing and influence within their respective societal structures.[ citation needed ]
The structural support, whether institutional or societal, an individual has outside of the household determines how capable one would be of surviving outside the household.
The access one has to individual assets, both economic (such as property, land, wealth, or earning ability) and personal (such as labor), determines fallback position because it is directly linked to one's capability of surviving outside the household. [46]
In South Asian societies land is one of the most valuable individual assets that can increase an individual's bargaining power, yet it is more uncommon and difficult for women to own land than men for a number of reasons: inheritance laws that allow women to inherit land are not strongly enforced, in order to own land individuals must obtain a certain level of education, which women have traditionally not had access to, and owning land and enforcing laws depends upon one's "economic and physical access to legal machinery" as well as access to government officials. [40] : 14 [47] Due to the unequal gender rights to land ownership, South Asian women are less capable of providing income to the household which lessens their bargaining power in the household. [40] [48] [49]
In some societies, there is a custom of housewife hidden savings as a counter to inequality.[ citation needed ]
Due to the traditional role of women in South Asia as caretakers in the household rather than workers bringing an income to the household, women are not socially perceived as deserving of more opportunities because worth correlates with wealth and not the quality or amount of work one has done. [32] [50]
Unequal access to strong fallback positions creates a situation in which different individuals within the household have more or less bargaining power, and therefore have more or less influence over household decision-making. When considering the factors that determine fallback position in intra-household bargaining and what populations have access to positive fallback positions, Bina Agarwal's research in rural South Asian communities shows that their women have less access to strong bargaining power and their interests are not reflected in household decisions. [40] [48] [47]
Altruism is the concern for the well-being of others, independently of personal benefit or reciprocity.
Game theory is the study of mathematical models of strategic interactions. It has applications in many fields of social science, and is used extensively in economics, logic, systems science and computer science. Initially, game theory addressed two-person zero-sum games, in which a participant's gains or losses are exactly balanced by the losses and gains of the other participant. In the 1950s, it was extended to the study of non zero-sum games, and was eventually applied to a wide range of behavioral relations. It is now an umbrella term for the science of rational decision making in humans, animals, and computers.
In economics, the free-rider problem is a type of market failure that occurs when those who benefit from resources, public goods and common pool resources do not pay for them or under-pay. Free riders may overuse common pool resources by not paying for them, neither directly through fees or tolls, nor indirectly through taxes. Consequently, the common pool resource may be under-produced, overused, or degraded. Additionally, despite evidence that people tend to be cooperative by nature, the presence of free-riders has been shown to cause cooperation to deteriorate, perpetuating the free-rider problem.
Feminist economics is the critical study of economics and economies, with a focus on gender-aware and inclusive economic inquiry and policy analysis. Feminist economic researchers include academics, activists, policy theorists, and practitioners. Much feminist economic research focuses on topics that have been neglected in the field, such as care work, intimate partner violence, or on economic theories which could be improved through better incorporation of gendered effects and interactions, such as between paid and unpaid sectors of economies. Other feminist scholars have engaged in new forms of data collection and measurement such as the Gender Empowerment Measure (GEM), and more gender-aware theories such as the capabilities approach. Feminist economics is oriented towards the goal of "enhancing the well-being of children, women, and men in local, national, and transnational communities."
The ultimatum game is a game that has become a popular instrument of economic experiments. An early description is by Nobel laureate John Harsanyi in 1961. One player, the proposer, is endowed with a sum of money. The proposer is tasked with splitting it with another player, the responder. Once the proposer communicates their decision, the responder may accept it or reject it. If the responder accepts, the money is split per the proposal; if the responder rejects, both players receive nothing. Both players know in advance the consequences of the responder accepting or rejecting the offer.
In game theory, a non-cooperative game is a game in which there are no external rules or binding agreements that enforce the cooperation of the players. A non-cooperative game is typically used to model a competitive environment. This is stated in various accounts most prominent being John Nash's 1951 paper in the journal Annals of Mathematics.
The dictator game is a popular experimental instrument in social psychology and economics, a derivative of the ultimatum game. The term "game" is a misnomer because it captures a decision by a single player: to send money to another or not. Thus, the dictator has the most power and holds the preferred position in this “game.” Although the “dictator” has the most power and presents a take it or leave it offer, the game has mixed results based on different behavioral attributes. The results – where most "dictators" choose to send money – evidence the role of fairness and norms in economic behavior, and undermine the assumption of narrow self-interest when given the opportunity to maximise one's own profits.
Inequity aversion (IA) is the preference for fairness and resistance to incidental inequalities. The social sciences that study inequity aversion include sociology, economics, psychology, anthropology, and ethology. Researchers on inequity aversion aim to explain behaviors that are not purely driven by self-interests but fairness considerations.
Martin James Browning is Professor of Economics at the University of Oxford, Oxford, England, a Fellow of Nuffield College, Oxford, a Fellow of the Econometric Society, and an emeritus Fellow of the European Economic Association.
Samuel Stebbins Bowles, is an American economist and Professor Emeritus at the University of Massachusetts Amherst, where he continues to teach courses on microeconomics and the theory of institutions. His work belongs to the neo-Marxian tradition of economic thought. However, his perspective on economics is eclectic and draws on various schools of thought, including what he and others refer to as post-Walrasian economics.
Family economics applies economic concepts such as production, division of labor, distribution, and decision making to the family. It is used to explain outcomes unique to family—such as marriage, the decision to have children, fertility, time devoted to domestic production, and dowry payments using economic analysis.
Bina Agarwal is an Indian development economist and Professor of Development Economics and Environment at the Global Development Institute at The University of Manchester. She has written extensively on land, livelihoods and property rights; environment and development; the political economy of gender; poverty and inequality; legal change; and agriculture and technological transformation.
Household economics analyses all the decisions made by a household. These analyses are both at the microeconomic and macroeconomic level. This field analyses the structures of households, the behavior of family members, and their broader influence on society, including: household consumption, division of labour within the household, allocation of time to household production, marriage, divorce, fertility, investment in children, and resource allocation. Malthus and Adam Smith studied the economics of the family in part by looking at the relationship between family size and living wage. Similarly, J.S. Mill and Le Play analysed the impacts of different family structures on the standard of living of different family members through redistribution of family resources, insurance and self production.
Warm-glow giving is an economic theory describing the emotional reward of giving to others. According to the original warm-glow model developed by James Andreoni, people experience a sense of joy and satisfaction for "doing their part" to help others. This satisfaction - or "warm glow" - represents the selfish pleasure derived from "doing good", regardless of the actual impact of one's generosity. Within the warm-glow framework, people may be "impurely altruistic", meaning they simultaneously maintain both altruistic and egoistic (selfish) motivations for giving. This may be partially due to the fact that "warm glow" sometimes gives people credit for the contributions they make, such as a plaque with their name or a system where they can make donations publicly so other people know the "good" they are doing for the community.
Women's property rights are property and inheritance rights enjoyed by women as a category within a society.
Social preferences describe the human tendency to not only care about one's own material payoff, but also the reference group's payoff or/and the intention that leads to the payoff. Social preferences are studied extensively in behavioral and experimental economics and social psychology. Types of social preferences include altruism, fairness, reciprocity, and inequity aversion. The field of economics originally assumed that humans were rational economic actors, and as it became apparent that this was not the case, the field began to change. The research of social preferences in economics started with lab experiments in 1980, where experimental economists found subjects' behavior deviated systematically from self-interest behavior in economic games such as ultimatum game and dictator game. These experimental findings then inspired various new economic models to characterize agent's altruism, fairness and reciprocity concern between 1990 and 2010. More recently, there are growing amounts of field experiments that study the shaping of social preference and its applications throughout society.
Third-party punishment is punishment of a transgressor which is administered, not by a victim of the transgression, but rather by a third party not directly affected by the transgression. It has been argued that third-party punishments are the essence of social norms, as they are an evolutionarily stable strategy, unlike second-party punishments. It has also been shown that third-party punishments are exhibited in all examined populations, though the magnitude of the punishments varies greatly, and that costly punishment co-varies with altruistic behavior. Differences between within-group and inter-group altruistic punishments have also been observed.
Gender inequality both leads to and is a result of food insecurity. According to estimates, women and girls make up 60% of the world's chronically hungry and little progress has been made in ensuring the equal right to food for women enshrined in the Convention on the Elimination of All Forms of Discrimination Against Women. Women face discrimination both in education and employment opportunities and within the household, where their bargaining power is lower. On the other hand, gender equality is described as instrumental to ending malnutrition and hunger. Women tend to be responsible for food preparation and childcare within the family and are more likely to be spent their income on food and their children's needs. The gendered aspects of food security are visible along the four pillars of food security: availability, access, utilization and stability, as defined by the Food and Agriculture Organization.
Behavioral game theory seeks to examine how people's strategic decision-making behavior is shaped by social preferences, social utility and other psychological factors. Behavioral game theory analyzes interactive strategic decisions and behavior using the methods of game theory, experimental economics, and experimental psychology. Experiments include testing deviations from typical simplifications of economic theory such as the independence axiom and neglect of altruism, fairness, and framing effects. As a research program, the subject is a development of the last three decades.
Parochial altruism is a concept in social psychology, evolutionary biology, and anthropology that describes altruism towards an in-group, often accompanied by hostility towards an out-group. It is a combination of altruism, defined as behavior done for the benefit of others without direct effect on the self, and parochialism, which refers to having a limited viewpoint. Together, these concepts create parochial altruism, or altruism which is limited in scope to one's in-group. Parochial altruism is closely related to the concepts of in-group favoritism and out-group discrimination. Research has suggested that parochial altruism may have evolved in humans to promote high levels of in-group cooperation, which is advantageous for group survival. Parochial altruism is often evoked to explain social behaviors within and between groups, such as why people are cooperative within their social groups and why they may be aggressive towards other social groups.