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Conspicuous consumption dynamics

  • Friedman, Daniel
  • Ostrov, Daniel N.

We formalize Veblen's idea of conspicuous consumption as two alternative forms of interdependent preferences, dubbed envy and pride. Agents adjust consumption patterns gradually, in the direction of increasing utility. From an arbitrary initial state, the distribution of consumption among agents with identical preferences converges to a unique equilibrium distribution. When pride is stronger, the equilibrium distribution has a right-skewed density. When envy is stronger, the equilibrium is concentrated at a single point, and the adjustment dynamics involve a shock wave that can be interpreted as a growing, moving, homogeneous "middle class."

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 64 (2008)
Issue (Month): 1 (September)
Pages: 121-145

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Handle: RePEc:eee:gamebe:v:64:y:2008:i:1:p:121-145
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