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Social status competition and the impact of income inequality in evolving social networks: An agent-based model

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  • Antinyan, Armenak
  • Horváth, Gergely
  • Jia, Mofei

Abstract

In this paper, we consider conspicuous consumption in a model in which individuals compare themselves to their social network neighbors in terms of the amount of a status good purchased. Individuals are heterogeneous with respect to income and can change their network links based on utility considerations. We study the impact of income inequality and income redistribution on status competition and individual welfare. We find that individuals with similar income levels tend to be connected to each other in the social network emerging in the long run. Under these circumstances, the income redistribution does not significantly affect the income share spent on the status good and the relative status of individuals. In a relatively equal society, individuals with below median income levels are better off in terms of welfare, everybody else is worse off. The aggregate effect of income redistribution on welfare is negative.

Suggested Citation

  • Antinyan, Armenak & Horváth, Gergely & Jia, Mofei, 2019. "Social status competition and the impact of income inequality in evolving social networks: An agent-based model," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 79(C), pages 53-69.
    • Handle: RePEc:eee:soceco:v:79:y:2019:i:c:p:53-69
    DOI: 10.1016/j.socec.2018.12.008
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    Cited by:

    1. Gallice, Andrea, 2018. "Social status, preferences for redistribution and optimal taxation: A survey," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 12, pages 1-17.
    2. Antinyan, Armenak & Horváth, Gergely & Jia, Mofei, 2020. "Curbing the consumption of positional goods: Behavioral interventions versus taxation," Journal of Economic Behavior & Organization, Elsevier, vol. 179(C), pages 1-21.
    3. G. B. Korovin, 2020. "Architecture of the agent-based model for the region’s industrial complex digital transformation," Journal of New Economy, Ural State University of Economics, vol. 21(3), pages 158-174, October.

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    More about this item

    Keywords

    Social status; Conspicuous consumption; Social networks; Inequality; Income redistribution;
    All these keywords.

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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