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Regulating the Environmental Consequences of Preferences for Social Status within an Evolutionary Framework

Listed author(s):
  • Eftichios Sartzetakis
  • Anastasios Xepapadeas
  • Athanasios Yannacopoulos

Taking as given that we are consuming too much and that overconsumption leads to environmental degradation, the present paper examines the regulator's choices between informative advertisement and consumptiontaxation. We model overconsumption by considering individuals that care about social status apart from the intrinsic utility, derived from direct consumption. We assume that there also exist individuals that care only about their own private consumption and we examine the evolution of preferences through time by allowing individuals to alter their behavior as a result of a learning process, akin to a replicator dynamics type.We consider the regulator's choice of consumption taxation and informative advertisement both in an arbitrary and an optimal control context. In the arbitrary overconsumption control context we find that the regulator could decrease, or even eliminate, the share of status seekers in the population. In the context of optimal overconsumption control, we show that the highest welfare is attained when status seekers are completely eliminated, while the lowest in the case that the entire population consists of status seekers.

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File URL: http://wpa.deos.aueb.gr/docs/Regulating.the.Environmental.Consequences.pdf
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Paper provided by Athens University of Economics and Business in its series DEOS Working Papers with number 1502.

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Date of creation: 19 Jan 2015
Handle: RePEc:aue:wpaper:1502
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  1. Bisin, Alberto & Verdier, Thierry, 1998. "On the cultural transmission of preferences for social status," Journal of Public Economics, Elsevier, vol. 70(1), pages 75-97, October.
  2. Schlag, Karl H., 1999. "Which one should I imitate?," Journal of Mathematical Economics, Elsevier, vol. 31(4), pages 493-522, May.
  3. Fershtman, Chaim & Weiss, Yoram, 1998. "Social rewards, externalities and stable preferences," Journal of Public Economics, Elsevier, vol. 70(1), pages 53-73, October.
  4. Fershtman, Chaim & Weiss, Yoram, 1993. "Social Status, Culture and Economic Performance," Economic Journal, Royal Economic Society, vol. 103(419), pages 946-959, July.
  5. Weiss, Yoram & Fershtman, Chaim, 1998. "Social status and economic performance:: A survey," European Economic Review, Elsevier, vol. 42(3-5), pages 801-820, May.
  6. Schlag, Karl H., 1998. "Why Imitate, and If So, How?, : A Boundedly Rational Approach to Multi-armed Bandits," Journal of Economic Theory, Elsevier, vol. 78(1), pages 130-156, January.
  7. Kenneth Arrow & Partha Dasgupta & Lawrence Goulder & Gretchen Daily & Paul Ehrlich & Geoffrey Heal & Simon Levin & Karl-Göran Mäler & Stephen Schneider & David Starrett & Brian Walker, 2004. "Are We Consuming Too Much?," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 147-172, Summer.
  8. Fuhai Hong & Xiaojian Zhao, 2014. "Information Manipulation and Climate Agreements," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(3), pages 851-861.
  9. Cole, Harold L & Mailath, George J & Postlewaite, Andrew, 1992. "Social Norms, Savings Behavior, and Growth," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1092-1125, December.
  10. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 841-877, October.
  11. Pim Heijnen, 2013. "Informative advertising by an environmental group," Journal of Economics, Springer, vol. 108(3), pages 249-272, April.
  12. Bisin, Alberto & Verdier, Thierry, 2001. "The Economics of Cultural Transmission and the Dynamics of Preferences," Journal of Economic Theory, Elsevier, vol. 97(2), pages 298-319, April.
  13. Kallbekken, Steffen & Westskog, Hege & Mideksa, Torben K., 2010. "Appeals to social norms as policy instruments to address consumption externalities," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 39(4), pages 447-454, August.
  14. Anastasios Xepapadeas, 2005. "Regulation and Evolution of Compliance in Common Pool Resources," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(3), pages 583-599, 09.
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