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Running to Keep in the Same Place: Consumer Choice as a Game of Status

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  • Ed Hopkins

    ()

  • Tatiana Kornienko

Abstract

If 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 Info

Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 92.

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Length: 30
Date of creation: Apr 2004
Date of revision:
Handle: RePEc:edn:esedps:92

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