Household Financial Decision-Making Models: Which to Choose for Experimental Investigation

Abstract

The paper offers a comparison of household financial decision-making models considering a household as one of the initial economic units, understanding the decision-making process and utility function perception of which is influential for the conception of the integrate economic development of a society. Paper provides a brief description of the most applicable within- household decision-making models, namely unitary, bargaining, and collective ones, denoting the pros and cons of their employment for experimental investigation by stating the appropriateness conditions, which are as follows: the ability to include more than two members considering their own preferences, various possible scope of modelled decisions, and framework allowing for empirical research. Regarding previous research, the collective model with Pareto weights appears to be the one, which justifies the conditions set.