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Negatively interdependent preferences

  • Efe A. Ok

    ()

    (Department of Economics, New York University, 269 Mercer St., New York, NY 10003)

  • Levent KoÚkesen

    ()

    (Department of Economics, New York University, 269 Mercer St., New York, NY 10003)

We develop a theory of representation of interdependent preferences that reflect the widely acknowledged phenomenon of keeping up with the Joneses (i.e. of those preferences which maintain that well-being depend on "relative standing" in the society as well as on material consumption). The principal ingredient of our analysis is the assumption that individuals desire to occupy a (subjectively) better position than their peers. This is quite a primitive starting point in that it does not give any reference to what is actually regarded as "status" in the society. We call this basic postulate negative interdependence, and study its implications. In particular, combining this assumption with some other basic postulates that are widely used in a number of other branches of the theory of individual choice, we axiomatize the relative income hypothesis, and obtain an operational representation of interdependent preferences.

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Article provided by Springer in its journal Social Choice and Welfare.

Volume (Year): 17 (2000)
Issue (Month): 3 ()
Pages: 533-558

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Handle: RePEc:spr:sochwe:v:17:y:2000:i:3:p:533-558
Note: Received: 7 December 1998/Accepted: 24 August 1999
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