Modeling Luxury Consumption: An Inter-Income Classes Study of Demand Dynamics and Social Behaviors
AbstractWe start from the observation that theoretical studies of luxury consumption are relatively rare in the economic analysis. In fact, while homothetic preferences simply cannot address the issue of luxury consumption, the use of non-homothetic preferences is restricted, at least in standard models, by the absence of consensus about the nature of luxury goods. Using the agent-based computational economics methodology, we, therefore, choose to de ne a luxurious item by its ability to display social statute. We, rst, put our analysis in perspective via a short revue of the main contributions about consumption behavior in social context. Through this revue, we identify a few social phenomenons involved in the formation of individual preferences: imitation, di erentiation and innovation. Second, building on these simple social behaviors, we develop a model of luxury preference formation, in which preferences evolve endogenously. Third, we explore the emerging properties of the model, especially, under which conditions we observe a specialization of consumption by social classes.
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Bibliographic InfoPaper provided by Groupe de REcherche en Droit, Économie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis in its series GREDEG Working Papers with number 2013-13.
Length: 22 pages
Date of creation: Apr 2013
Date of revision:
Preference formation; Consumption; Luxury good; Agent-based model; Income classes;
Find related papers by JEL classification:
- B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Institutional; Evolutionary
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-05-22 (All new papers)
- NEP-CWA-2013-05-22 (Central & Western Asia)
- NEP-HME-2013-05-22 (Heterodox Microeconomics)
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.:
- Andreas Chai & Alessio Moneta, 2010. "Retrospectives: Engel Curves," Journal of Economic Perspectives, American Economic Association, vol. 24(1), pages 225-40, Winter.
- Marco Valente, 2012. "Evolutionary demand: a model for boundedly rational consumers," Journal of Evolutionary Economics, Springer, vol. 22(5), pages 1029-1080, November.
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