The Office of the Vice President for Research and Innovation recognizes Hans Haller, a professor of economics in the College of Science, for exploring the nexus of economic and social decisions.
Haller has made numerous contributions to game and bargaining theory, decision and allocation under uncertainty, objectives of firms, and formation and utilization of networks. He pioneered and performed for over two decades an investigation of the role of multi-member households in a competitive market environment.
The basic premise is that the allocation of resources among consumers and consumer welfare are affected by the composition of households and, conversely, the formation and stability of households may depend on economic conditions and considerations.
This approach contrasts with traditional consumer theory, general equilibrium theory, and empirical studies that have frequently used “consumer” and “household” as synonyms and treat households as if they were single consumers.
In their joint work, Hans Haller and Hans Gersbach from ETH Zurich, a leading university for technology, math, science, and management in Switzerland, set out to link the formation, composition, decision-making, and stability of households or, more generally, socio-economic groups. They developed general equilibrium models of pure exchange economies in which households can have several members and act as collective decision-making units on the one hand and as competitive market participants on the other hand.
Moreover, their more advanced models combine traditional markets (for commodities) and matching (markets for people or partners). An intriguing finding is that both markets reaching equilibrium simultaneously may prove impossible when the two markets are interrelated.
In the multi-person household scenario, each household member’s consumption is specified. Every member has individual preferences and welfare conclusions are based on those. However, a person does not only care about her own consumption, but also cares about the identity and the consumption of other household members. Thus the model allows for household-specific group and consumption externalities. In fact, there is no economic reason to form multi-member households unless there exist positive externalities or other benefits from household formation or household production; for example, increased endowments or government transfers.
The unifying general equilibrium framework allows the study of policy implications like the impact of tax policy and divorce law on household stability or – when households remain stable – on resource allocation. Another interesting aspect is the cause and effect of a shift in bargaining power within households. A person’s increased welfare due to greater bargaining power within her household may be offset by similar widespread shifts of bargaining in other households, a phenomenon that can only be observed in a general equilibrium context.
Gersbach and Haller, pioneers and leaders in the area of their joint research, the interaction between economic and social decisions, are finalizing a monograph on the subject.
“Bargaining, Evolution, and Networks: A special issue in honor of Hans Haller,” was published by the journal Mathematical Social Sciences. Haller received his “Doctor rerum naturalium” degree from the University of Erlangen & Nurnberg.