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Keeping Up with the Joneses as an Outcome of Getting Ahead of the Smiths. A Two-Stage Veblenian Status Game

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  • Frédéric Gavrel

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

Abstract

In a status game, homogenous individuals first decide on their income (and on the effort necessary to that end) with the aim at Getting ahead of the Smithes (GAS). Next, they make use of a pure positional good to make incomes visible. Although the GAS hypothesis is ordinal, the signalling costs induce cardinal social concerns. The GAS hypothesis, translated into the KUJ (Keeping Up with the Joneses) (pride) concern, generates an equilibrium in which identical agents have unequal income levels. This equilibrium is an egalitarian optimum. But utilitarian and Paretian inefficiency are the price paid for equality.

Suggested Citation

  • Frédéric Gavrel, 2016. "Keeping Up with the Joneses as an Outcome of Getting Ahead of the Smiths. A Two-Stage Veblenian Status Game," Working Papers halshs-01319593, HAL.
    • Handle: RePEc:hal:wpaper:halshs-01319593
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01319593v1
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    References listed on IDEAS

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    1. Frédéric Gavrel & Thérèse Rebière, 2015. "On the Equilibrium and Welfare Consequences of Going Ahead of the Smiths," Working Papers halshs-01242504, HAL.
    2. Bilancini, Ennio & Boncinelli, Leonardo, 2014. "Instrumental cardinal concerns for social status in two-sided matching with non-transferable utility," European Economic Review, Elsevier, vol. 67(C), pages 174-189.
    3. Friedman, Daniel & Ostrov, Daniel N., 2008. "Conspicuous consumption dynamics," Games and Economic Behavior, Elsevier, vol. 64(1), pages 121-145, September.
    4. Frédéric Gavrel & Thérèse Rebière, 2017. "On the equilibrium and welfare consequences of getting ahead of the Smiths," Post-Print halshs-01591900, HAL.
    5. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-969, July.
    6. Frédéric Gavrel & Thérèse Rebière, 2018. "On the equilibrium and welfare consequences of getting ahead of the Smiths," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 20(2), pages 257-270, April.
    7. Ed Hopkins & Tatiana Kornienko, 2004. "Running to Keep in the Same Place: Consumer Choice as a Game of Status," American Economic Review, American Economic Association, vol. 94(4), pages 1085-1107, September.
    8. Ireland, N. J., 2001. "Optimal income tax in the presence of status effects," Journal of Public Economics, Elsevier, vol. 81(2), pages 193-212, August.
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