Keeping Up with the Joneses as an Outcome of Getting Ahead of the Smiths. A Two-Stage Veblenian Status Game
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.
|Date of creation:||24 May 2016|
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References listed on IDEAS
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- Frédéric Gavrel & Thérèse Rebière, 2015. "On the Equilibrium and Welfare Consequences of Going Ahead of the Smiths," Working Papers halshs-01242504, HAL.
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- 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. Full references (including those not matched with items on IDEAS)
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