In this paper, we present a model of a one parent–one child household where parental decisions on labor supply, leisure, and the demand for private and public child care are simultaneously endogenized and intertemporally determined. We characterize the path of the optimal decisions and...

The Alchian-Allen substitution theorem states that an increase of the prices of two similar goods by the same amount leads to a relative increase in the compensated demand of the more expensive good. In this paper we generalize this theorem to ordinary demand functions and show under which...

We explore the Alchian–Allen effect–that is, the effect of an absolutely equal increase in the price of two goods on their demand ratio–for conditional (viz. short-run) and unconditional (viz. long-run) demand functions. We show that the Alchian–Allen effect for unconditional demand...

We explore the implications of the generalised Alchian–Allen theorem for the labour-leisure-child-care decision of a mother with young children. In this framework we find: (i) For mothers who work only a few hours a week, a rise in wages arguably increases the demand for leisure relative to...

This paper provides, as a counter example to the Alchian–Allen theorem, a theory of Giffen-like goods: a per unit charge to two similar goods raises the relative price of the lower quality good and yet increases the (relative) demand of the good.

This paper shows a role for emotion in rational choice. The key concept here is “time illusion”. The perception of the time spent on an activity is often different from the actual time spent, and depends on how enjoyable the activity is. Based on the conception that time illusion affects...

It is shown that a Walrasian price adjustment process fails to converge to an equilibrium in an exchange economy with three consumers and three commodities, where each consumer has a quasilinear utility function, desires only two commodities, and demands positive amounts of both commodities. The...

We investigate whether, and under which conditions, a revenue-neutral environmental tax reform may yield an employment double dividend, i.e., an improvement of environmental quality and an increase in aggregate employment. Using a model with two market imperfections – a rigid real wage and...

As a part of their competition policies governments decide whether to allow for free market entry of firms or to regulate market access. We analyze a model where governments (ab)use these policy decisions for strategic reasons in an international setting. Multiple equilibria of this game emerge;...