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Choosing the Joneses: Endogenous Goals and Reference Standards

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  • Falk, Armin

    ()
    (University of Bonn)

  • Knell, Markus

    ()
    (Austrian National Bank)

Abstract

A growing economic literature stresses the importance of relative comparisons, e.g., for savings and consumption or happiness. In this literature it is usually assumed that reference standards against which people compare themselves are exogenously given. In contrast findings from social psychology suggest that people play an active role in determining their reference standards. We present a social comparison model where people choose their reference standards to serve motives of self-improvement and self-enhancement. The model predicts that reference standards increase in individuals' abilities and that thus people tend to compare themselves to similar others. The results of a questionnaire study confirm the model’s prediction.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1152.

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Length: 24 pages
Date of creation: May 2004
Date of revision:
Publication status: published in: Scandinavian Journal of Economics, 2004, 106 (3), 417-435
Handle: RePEc:iza:izadps:dp1152

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Keywords: reference standard; goals; social comparison; happiness;

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  1. MacCulloch, Robert, 1999. "What makes a revolution?," ZEI Working Papers B 24-1999, ZEI - Center for European Integration Studies, University of Bonn.
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  12. John Y. Campbell & John Cochrane, 1999. "Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 107(2), pages 205-251, April.
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