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Meet the Joneses: An Empirical Investigation of Reference Groups in Relative Income Position Comparisons

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Author Info
Markus Schaffner
Benno Torgler

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Abstract

It is generally understood that people care about their absolute income position, and several studies have in fact moved beyond this, showing that people also place considerable significance on their relative income position. However, empirical evidence about the behavioural consequences is scarce. We address this shortcoming by exploring the relative income effect in a (controlled) sporting contest environment. Specifically, we look at the pay-performance relationship by working with a large panel data set consisting of 26 NBA seasons. We explore how closeness affects positional concerns exploring in detail several potential reference groups. This allows checking of their relevance and of the scope of comparisons, a critical aspect in the literature that requires further investigation.

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File URL: http://www.bus.qut.edu.au/faculty/schools/economics/documents/discussionPapers/2008/234Torgler.pdf
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Paper provided by School of Economics and Finance, Queensland University of Technology in its series School of Economics and Finance Discussion Papers and Working Papers Series with number 234.

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Length: 21 pages
Date of creation: 17 Jun 2008
Date of revision: 17 Jun 2008
Handle: RePEc:qut:dpaper:234

Note: This paper was presented at the 2nd End-Of-Year Conference of Swiss Economists Abroad,December 21, 2007 at the University of St. Gallen, Switzerland and at the X-institutional PhD Workshop, November 26, 2007 at the Australian National University, Canberra, Australia The School of Economics and Finance, Queensland University of Technology, GPO Box 2434, Brisbane, QLD 4001, Australia CREMA - Center for Research in Economics, Management and the Arts, Gellertstrasse 18, CH-4052 Basel, Switzerland CESifo, Poschingerstrasse 5, D-81679 Munich, Germany 1(Newsweek, 2/17/92, Vol. 119, Issue 7).
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Web page: http://www.bus.qut.edu.au/faculty/schools/economics/
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