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Relational consumption and nonlinear dynamics in an overlapping generations model

  • Angelo Antoci

    ()

  • Mauro Sodini

    ()

  • Luca Zarri

    ()

In this paper, we show that incorporating the relational dimension into an otherwise standard OLG model and focusing on dynamic leisure externalities leads to dramatically different predictions. Here, we show that when the old perceive private and relational consumption as substitutable goods, a series of interesting dynamic outcomes—such as local indeterminacy, nonlinear phenomena (including chaotic dynamics) and even multiple equilibria with global indeterminacy—may arise. We also draw some welfare implications and relate them to the well-known “happiness paradox” arising within contemporary affluent societies. Copyright Springer-Verlag Italia 2014

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File URL: http://hdl.handle.net/10.1007/s10203-013-0147-9
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Article provided by Springer & Associazione per la Matematica in its journal Decisions in Economics and Finance.

Volume (Year): 37 (2014)
Issue (Month): 1 (April)
Pages: 137-158

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Handle: RePEc:spr:decfin:v:37:y:2014:i:1:p:137-158
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