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Choosing the Joneses: Endogenous Goals and Reference Standards

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  • Armin Falk
  • Markus Knell

Abstract

A growing economic literature stresses the importance of relative comparisons, e.g., for savings and consumption or happiness. In this literature it is usually assumed that reference standards against which people compare themselves are exogenously given. In contrast, findings from social psychology suggest that people play an active role in determining their reference standards. We introduce a social comparison model where people choose their reference standards to serve motives of self-improvement and self-enhancement. The model predicts that reference standards increase in individuals' abilities and that people thus tend to compare themselves to similar others. The results of a questionnaire study confirm the prediction of the model. Copyright The editors of the "Scandinavian Journal of Economics", 2004 .

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Bibliographic Info

Article provided by Wiley Blackwell in its journal The Scandinavian Journal of Economics.

Volume (Year): 106 (2004)
Issue (Month): 3 (October)
Pages: 417-435

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Handle: RePEc:bla:scandj:v:106:y:2004:i:3:p:417-435

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  1. Neumark, David & Postlewaite, Andrew, 1998. "Relative income concerns and the rise in married women's employment," Journal of Public Economics, Elsevier, vol. 70(1), pages 157-183, October.
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  6. John Y. Campbell & John H. Cochrane, 1994. "By Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior," CRSP working papers 412, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  7. Clark, Andrew E. & Oswald, Andrew J., 1996. "Satisfaction and comparison income," Journal of Public Economics, Elsevier, vol. 61(3), pages 359-381, September.
  8. Stark, Oded & Taylor, J Edward, 1991. "Migration Incentives, Migration Types: The Role of Relative Deprivation," Economic Journal, Royal Economic Society, vol. 101(408), pages 1163-78, September.
  9. MacCulloch, Robert, 1999. "What makes a revolution?," ZEI Working Papers B 24-1999, ZEI - Center for European Integration Studies, University of Bonn.
  10. John Y. Campbell & John Cochrane, 1999. "Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 205-251, April.
  11. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December.
  12. Uri Gneezy & Muriel Niederle & Aldo Rustichini, 2003. "Performance In Competitive Environments: Gender Differences," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 1049-1074, August.
  13. Markus Knell, 1999. "Social Comparisons, Inequality, and Growth," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 155(4), pages 664-, December.
  14. Olof Johansson-Stenman & Fredrik Carlsson & Dinky Daruvala, 2002. "Measuring Future Grandparents" Preferences for Equality and Relative Standing," Economic Journal, Royal Economic Society, vol. 112(479), pages 362-383, April.
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