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On Positional Consumption and Technological Innovation- an Agent-based Approach

  • João Bernardino
  • Tanya Araújo

Positional behavior is a source of externalities and sets limits to wellbeing. Remedies against this market failure are defended by some authors and rejected by others, while the core of the discussion rests on the benefits and costs of applying economic instruments. One of the issues discussed is the role that the competition for positional goods may have in generating technological innovation. This paper aims to contribute to the understanding of this process by analyzing an agent-based model. We observe a plausible structure of the dynamics behind the process of generation of technological innovation by positional consumption and obtain results on the influence of some key factors on the pace of innovation, particularly those of income inequality, the Hirsch conjecture of relative increase of positional consumption with affluence, and consumer network and social neighborhood sizes.

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File URL: http://pascal.iseg.utl.pt/~depeco/wp/wp042010.pdf
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Paper provided by ISEG - School of Economics and Management, Department of Economics, University of Lisbon in its series Working Papers Department of Economics with number 2010/04.

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Date of creation: Jan 2010
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Handle: RePEc:ise:isegwp:wp42010
Contact details of provider: Postal: Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL
Web page: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC

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  1. Vriend, Nicolaas J., 2006. "ACE Models of Endogenous Interactions," Handbook of Computational Economics, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 21, pages 1047-1079 Elsevier.
  2. Robert H. Frank, 2006. "Taking Libertarian Concerns Seriously: Reply to Kashdan and Klein," Econ Journal Watch, Econ Journal Watch, vol. 3(3), pages 435-451, September.
  3. Robert H. Frank, 2005. "Positional Externalities Cause Large and Preventable Welfare Losses," American Economic Review, American Economic Association, vol. 95(2), pages 137-141, May.
  4. Tanya Araujo & R. Vilela Mendes, 2006. "Market-oriented innovation: When is it profitable? An abstract agent-based study," Working Papers Department of Economics 2006/31, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  5. Andrew Kashdan & Daniel B. Klein, 2006. "Assume the Positional: Comment on Robert Frank," Econ Journal Watch, Econ Journal Watch, vol. 3(3), pages 412-434, September.
  6. Wilhite, Allen, 2006. "Economic Activity on Fixed Networks," Handbook of Computational Economics, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 20, pages 1013-1045 Elsevier.
  7. Tanya Araújo & R. Vilela Mendes, 2009. "Innovation And Self-Organization In A Multi-Agent Model," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 12(02), pages 233-253.
  8. Kjell Arne Brekke & Richard B. Howarth, 2000. "The Social Contingency of Wants," Land Economics, University of Wisconsin Press, vol. 76(4), pages 493-503.
  9. Kjell Arne Brekke & Richard B. Howarth & Karine Nyborg, 1998. "Are there Social Limits to Growth?," Discussion Papers 239, Research Department of Statistics Norway.
  10. Dawid, Herbert, 2006. "Agent-based Models of Innovation and Technological Change," Handbook of Computational Economics, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 25, pages 1235-1272 Elsevier.
  11. Roger Mason, 2000. "Conspicuous consumption and the positional economy: policy and prescription since 1970," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 21(3-4), pages 123-132.
  12. Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 35-47, June.
  13. Richard B. Howarth & Kjell Arne Brekke, 1998. "Status Preferences and Economic Growth," Discussion Papers 240, Research Department of Statistics Norway.
  14. Axelrod, Robert & Tesfatsion, Leigh, 2006. "A Guide for Newcomers to Agent-Based Modeling in the Social Sciences," Staff General Research Papers 12515, Iowa State University, Department of Economics.
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