Nash-Bargained Household Decisions: Reply

Pierre-Andre Chiappori's (1988) claim that the Nash-bargaining model is of "weak empirical relevance" and "neither convenient nor really restrictive" is incorrect. Nash-bargained household behavior implies a rich set of empirical implications extending well beyond the Pareto efficiency of intrafamily distributions. By systematically accounting for the impact of opportunities outside the family on resource distribution within the family, Nash-bargained demand theory considerably expands the scope of neoclassical demand theory. Such expansion can elucidate issues ranging from the impact of alimony and child support laws in developed societies to the intrafamily distribution of nutrition in less developed countries.