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Running to Keep in the Same Place: Consumer Choice as a Game of Status

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  • Ed Hopkins
  • Tatiana Kornienko

Abstract

If individuals care about their status, defined as their rank in the distribution of consumption of one "positional" good, then the consumer's problem is strategic as her utility depends on the consumption choices of others. In the symmetric Nash equilibrium, each individual spends an inefficiently high amount on the status good. Using techniques from auction theory, we analyze the effects of exogenous changes in the distribution of income. In a richer society, almost all individuals spend more on conspicuous consumption, and individual utility is lower at each income level. In a more equal society, the poor are worse off.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 94 (2004)
Issue (Month): 4 (September)
Pages: 1085-1107

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Handle: RePEc:aea:aecrev:v:94:y:2004:i:4:p:1085-1107

Note: DOI: 10.1257/0002828042002705
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  1. Ed Hopkins & Tatiana Kornienko, 2004. "Ratio Orderings and Comparative Statics," ESE Discussion Papers 91, Edinburgh School of Economics, University of Edinburgh.
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  16. Alexis DIRER, 2001. "Interdependent Preferences and Aggregate Saving," Annales d'Economie et de Statistique, ENSAE, issue 63-64, pages 297-308.
  17. Postlewaite, Andrew, 1998. "The social basis of interdependent preferences," European Economic Review, Elsevier, vol. 42(3-5), pages 779-800, May.
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