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Conspicuous Consumption and the Existence of Upward Sloping Demand Curves

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Author Info
Giacomo Corneo (University of Bonn)
Olivier Jeanne (ENPC-CERAS)

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Abstract

The paper develops a theoretical framework for studying conspicuous consumption. This is modeled as a device that signals the consumer's social status. Status is some function of the individual's rank in the wealth hierarchy. This approach makes it possible to distinguish between snob and conformist consumer behavior. It is shown that when behavior is conformist, the market demand curve for the good can exhibit a positive slope. A number of unconventional implications for public policy are then derived concerning taxation, monopoly power, and the voluntary provision of public goods.

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File URL: ftp://web.bgse.uni-bonn.de/pub/RePEc/bon/bonsfa/bonsfa461.ps
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Publisher Info
Paper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number 461.

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Date of creation: Dec 1994
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Handle: RePEc:bon:bonsfa:461

Contact details of provider:
Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 9221
Web page: http://www.bgse.uni-bonn.de/index.php?id=517

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Related research
Keywords: consumption externalities status-seeking behavior law of demand

Find related papers by JEL classification:
D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Frank, Robert H, 1984. "Are Workers Paid Their Marginal Products?," American Economic Review, American Economic Association, vol. 74(4), pages 549-71, September. [Downloadable!] (restricted)
  2. Frank, Robert H, 1985. "The Demand for Unobservable and Other Nonpositional Goods," American Economic Review, American Economic Association, vol. 75(1), pages 101-16, March. [Downloadable!] (restricted)
  3. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August. [Downloadable!] (restricted)
    Other versions:
  4. Katz, Michael L & Shapiro, Carl, 1994. "Systems Competition and Network Effects," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 93-115, Spring. [Downloadable!] (restricted)
  5. Dougan, William R, 1982. "Giffen Goods and the Law of Demand," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 809-15, August. [Downloadable!] (restricted)
  6. Hollander, Heinz, 1990. "A Social Exchange Approach to Voluntary Cooperation," American Economic Review, American Economic Association, vol. 80(5), pages 1157-67, December. [Downloadable!] (restricted)
  7. Barzel, Yoram & Suen, Wing, 1992. "The Demand Curves for Giffen Goods Are Downward Sloping," Economic Journal, Royal Economic Society, vol. 102(413), pages 896-905, July. [Downloadable!] (restricted)
    Other versions:
  8. Karni, Edi & Levin, Dan, 1994. "Social Attributes and Strategic Equilibrium: A Restaurant Pricing Game," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 822-40, August. [Downloadable!] (restricted)
  9. Konrad, Kai A., 1992. "Wealth seeking reconsidered," Journal of Economic Behavior & Organization, Elsevier, vol. 18(2), pages 215-227, July. [Downloadable!] (restricted)
  10. Ireland, Norman J., 1994. "On limiting the market for status signals," Journal of Public Economics, Elsevier, vol. 53(1), pages 91-110, January. [Downloadable!] (restricted)
  11. Becker, Gary S, 1991. "A Note on Restaurant Pricing and Other Examples of Social Influences on Price," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1109-16, October. [Downloadable!] (restricted)
    Other versions:
  12. Ng, Yew-Kwang, 1987. "Diamonds Are a Government's Best Friend: Burden-Free Taxes on Goods Valued for Their Values," American Economic Review, American Economic Association, vol. 77(1), pages 186-91, March. [Downloadable!] (restricted)
  13. Coelho, Philip R P & McClure, James E, 1993. "Toward an Economic Theory of Fashion," Economic Inquiry, Oxford University Press, vol. 31(4), pages 595-608, October.
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Peter Funk, 1994. "Economic Possibilities for the Grandchildern of John Maynard Keynes," Discussion Paper Serie A 512, University of Bonn, Germany. [Downloadable!]
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