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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)

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: http://www.wiwi.uni-bonn.de/bgsepapers/bonsfa/bonsfa461.ps
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Bibliographic 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
Date of revision:
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 6884
Web page: http://www.bgse.uni-bonn.de

Related research

Keywords: consumption externalities; status-seeking behavior; law of demand;

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References

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  1. 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.
  2. 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.
  3. Barzel, Y. & Suen, W., 1991. "The Demand Curves for Giffen Goods are Downward Sloping," Discussion Papers in Economics at the University of Washington 91-18, Department of Economics at the University of Washington.
  4. 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.
  5. Michael L. Katz & Carl Shapiro, 1994. "Systems Competition and Network Effects," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 93-115, Spring.
  6. 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.
  7. Hollander, Heinz, 1990. "A Social Exchange Approach to Voluntary Cooperation," American Economic Review, American Economic Association, vol. 80(5), pages 1157-67, December.
  8. Coelho, Philip R P & McClure, James E, 1993. "Toward an Economic Theory of Fashion," Economic Inquiry, Western Economic Association International, vol. 31(4), pages 595-608, October.
  9. 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.
  10. Konrad, Kai A., 1992. "Wealth seeking reconsidered," Journal of Economic Behavior & Organization, Elsevier, vol. 18(2), pages 215-227, July.
  11. Frank, Robert H, 1984. "Are Workers Paid Their Marginal Products?," American Economic Review, American Economic Association, vol. 74(4), pages 549-71, September.
  12. Gerhard Orosel, 1986. "Tentative notes on prestige seeking and pareto-efficiency," Journal of Economics, Springer, vol. 5(1), pages 169-194, December.
  13. 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.
  14. Ireland, Norman J., 1994. "On limiting the market for status signals," Journal of Public Economics, Elsevier, vol. 53(1), pages 91-110, January.
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Citations

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Cited by:
  1. Corneo, Giacomo G., 1997. "The theory of the open shop trade union reconsidered," Labour Economics, Elsevier, vol. 4(1), pages 71-84, March.
  2. Kovács, Kármen, 2011. "Az egyszerre érvényesülő társadalmi externáliák hatásai a státusjavak keresletére
    [The effects on the demand for status goods exerted by single-occasion social externals]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 314-332.
  3. Peter Funk, 1994. "Economic Possibilities for the Grandchildern of John Maynard Keynes," Discussion Paper Serie A 512, University of Bonn, Germany.

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