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Modeling Luxury Consumption: An Inter-Income Classes Study of Demand Dynamics and Social Behaviors

  • Anaïs Carlin

    (University of Nice Sophia Antipolis, France

In this paper we develop an agent-based model of conspicuous consumption built on well-established social behaviours. The process of preference formation, based on imitation and differentiation under cognitive limitations, endogenously generates class-specific consumption profiles. Considering consumption as competition among households to obtain social recognition, we find that low levels of 'social competition' increases individual well-being. Especially, the desire to imitate 'social models' of consumption appears as the main determinant of individual well-being dynamics. According to the model, public policies, when aiming to reduce income inequality, are efficient for increasing 'subjective well-being' in the economy, however, well-being improvements are low when demonstration effects and consumption standards are high.

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Paper provided by Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis in its series GREDEG Working Papers with number 2013-13.

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Length: 29 pages
Date of creation: Apr 2013
Date of revision: May 2014
Handle: RePEc:gre:wpaper:2013-13
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  1. Andreas Chai & Alessio Moneta, 2010. "Retrospectives: Engel Curves," Journal of Economic Perspectives, American Economic Association, vol. 24(1), pages 225-40, Winter.
  2. Marco Valente, 2012. "Evolutionary demand: a model for boundedly rational consumers," Journal of Evolutionary Economics, Springer, vol. 22(5), pages 1029-1080, November.
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