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The expected price of keeping up with the Joneses

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  • Armantier, Olivier
  • Filippin, Antonio
  • Neubauer, Michael
  • Nunziata, Luca

Abstract

Inflation expectations elicited in surveys have been found to exhibit large dispersion across individuals. Although several explanations have been proposed, none fully explain this puzzle. We explore in this paper a new behavioral factor: social comparison. Using original survey data, we find that respondents who feel they are falling behind compared to their peers report significantly and substantially higher inflation expectations. We argue that this result is consistent with an experience based belief formation model in which those unable to “keep up with the Joneses” overweight the high prices of “aspiration” goods they are unable to purchase.

Suggested Citation

  • Armantier, Olivier & Filippin, Antonio & Neubauer, Michael & Nunziata, Luca, 2022. "The expected price of keeping up with the Joneses," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 1203-1220.
    • Handle: RePEc:eee:jeborg:v:200:y:2022:i:c:p:1203-1220
    DOI: 10.1016/j.jebo.2020.07.022
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    More about this item

    Keywords

    Inflation expectations; Social comparison; Inequality;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E03 - Macroeconomics and Monetary Economics - - General - - - Behavioral Macroeconomics
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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