Running to Keep in the Same Place: Consumer Choice as a Game of Status
AbstractIf individuals care about their status, defined as their rank in the distribution of consumption of one “positional” good, then the consumer’s problem is strategic as her utility depends on the consumption choices of others. In the symmetric Nash equilibrium, each individual spends an inefficiently high amount on the status good. Using techniques from auction theory, we analyze effects of exogenous changes in the distribution of income. In a richer society, almost all individuals spend more on conspicuous consumption, and individual utility is lower at each income level. In a more equal society, the poor are worse off.
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Bibliographic InfoPaper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 92.
Date of creation: Apr 2004
Date of revision:
Other versions of this item:
- Ed Hopkins & Tatiana Kornienko, 2004. "Running to Keep in the Same Place: Consumer Choice as a Game of Status," American Economic Review, American Economic Association, vol. 94(4), pages 1085-1107, September.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- D62 - Microeconomics - - Welfare Economics - - - Externalities
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-04-18 (All new papers)
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