Microeconomic Model of Household Choice - The Household as a Disputant

• NCJ Number: 92980
• Journal: Law & Society Review Volume: 15 Issue: 3-4 Dated: (1980-81) Pages: 611-630,883-910
• Author(s): F M Gollop; J Marquardt
• Date Published: 1981
• Length: 48 pages
• Sponsoring Agency: US Dept of Justice
• Corporate Author: University of Wisconsin-Madison
• Publication Format: Article
• Language: English
• Country: United States of America

Annotation

In an economic model of household dispute resolution and prevention, the household maximizes its expected utility by formulating an optimal multiperiod plan for the allocation of household time as well as money, subject to the household's full-wealth budget constraint, its information set or subjective probability distributions, and market prices.

Abstract

The typical household desires to resolve or avoid disputes with other households and can do so by expending household time and money, the household's scarce resources. An economic model of household dispute resolution and prevention must incorporate three important dimensions: (1) the expenditures on dispute resolution and prevention must be treated as investment by the household, (2) past plus present investments contribute to the formation of capital stocks, and (3) household investments are made in an environment of uncertainty. The household's allocation of time among leisure, disputing, and prevention activities is based on factors analogous to those considered by the household in making allocations of money. The necessary conditions suggest that the household will invest its time so that the expected marginal utilities of these three uses of household time are equalized. The derivation of the first-order conditions for optimal household resource allocation is only the first step in a study of investments in dispute resolution and prevention. The next step is to examine the response of the household to changes in data such as wage rates, prices of lawyers' services, prices of ordinary consumption goods, and subjective probability distributions. Two approaches to the investigation of such responses are possible: qualitative and empirical analysis. Qualitative analysis is inconclusive, but an empirical analysis, with simplifying assumptions, can yield much insight. Footnotes and about 700 references are included.