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Conspicuous Consumption and Inequality

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  • Harriger, Jessica
  • Khanna, Neha
  • Pape, Andreas

Abstract

We analyze the change in consumer demand following a mean preserving change in consumption inequality when there is conspicuous consumption. We model interdependent preferences including “keeping up with the Joneses” (imitating others) and “running away from the Joneses” (distinguishing oneself from others) with multiple peer groups and peer group effects (envy and snob effects). An individual not directly involved in the redistribution increases consumption of the more conspicuous good when she demonstrates i) ‘keeping up’ and a relatively stronger envy effect, or ii) ‘running away’ and a relatively stronger snob effect. Behaviors generated by existing models emerge as special cases.

Suggested Citation

  • Harriger, Jessica & Khanna, Neha & Pape, Andreas, 2010. "Conspicuous Consumption and Inequality," MPRA Paper 24910, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:24910
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    File URL: https://mpra.ub.uni-muenchen.de/24910/1/MPRA_paper_24910.pdf
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    References listed on IDEAS

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    5. Postlewaite, Andrew, 1998. "The social basis of interdependent preferences," European Economic Review, Elsevier, vol. 42(3-5), pages 779-800, May.
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    7. Sen, Amartya, 1973. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198281931.
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    Cited by:

    1. Saravana Jaikumar & Ankur Sarin, 2015. "Conspicuous consumption and income inequality in an emerging economy: evidence from India," Marketing Letters, Springer, vol. 26(3), pages 279-292, September.

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    More about this item

    Keywords

    Conspicuousness; peer group effects; keeping up with the Joneses; status signaling; envy; snob;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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