On the Equilibrium and Welfare Consequences of Keeping Up With The Joneses

Frédéric Gavrel and Therese Rebiere

Working Papers from HAL

Abstract: This paper provides an analysis of the social consequences of people seeking to keep up with the Joneses. All individuals attempt to reach a higher rank than the Joneses, including the Joneses themselves. This attitude gives rise to an equilibrium in which all individuals have equal utilities but unequal (gross) incomes. Due to a rat-race effect, individuals devote too much energy to climbing the social scale in this equilibrium. However, laissez-faire equilibrium is an equal-utility constrained social optimum. Unexpectedly, numerical simulations show that this theory could account for the observed distribution of intermediate wages.

Keywords: Keeping up with the Joneses; Social interactions; Well-being; Inequalities; Efficiency JEL Classification numbers: D3; D6; D8; I3; Z1 (search for similar items in EconPapers)
Date: 2015-06-01
New Economics Papers: this item is included in nep-hpe and nep-mic
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01158406
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Working Paper: On the Equilibrium and Welfare Consequences of 'Keeping up with the Joneses' (2015)
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