Status spending races, cooperative consumption and voluntary public income disclosure
AbstractScholars from Duesenberry to Frank have argued that the pursuit of a higher social status, although rational from the individualâ€™s viewpoint, might be wasteful to society. Status conscious individuals find it optimal to overâ€consume positional goods and thus exert a negative externality on their peers. This paper presents a classroom experiment to introduce students to the theories of relative income. The experiment illustrates the external effect of positional goods consumption and discusses social arrangements to alleviate this externality problem. Students learn that a social arrangement as simple as voluntary income disclosure can revert individual consumption back to socially optimal levels.
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Bibliographic InfoArticle provided by Economics Network, University of Bristol in its journal International Review of Economics Education.
Volume (Year): 10 (2011)
Issue (Month): 1 ()
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Postal: University of Bristol, BS8 1HH, United Kingdom
Fax: +44(0)117 331 4396
Web page: http://www.economicsnetwork.ac.uk/iree
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