Relational consumption and nonlinear dynamics in an overlapping generations model
Mauro Sodini () and
Luca Zarri Additional contact information Mauro Sodini: Associazione Italiana per la Cultura della Cooperazione e del Non Profit, Postal: P.le della Vittoria, 15 - 47121 Forlì, Italy, http://www.aiccon.it
In this paper, we show that incorporating the relational dimension into an otherwise standard OLG model and focusing on dynamic leisure externalities leads to dramatically different predictions. Here we show that when the old perceive private and relational consumption as substitutable goods, a series of interesting dynamic outcomes – such as local indeterminacy, non-linear phenomena (including chaotic dynamics) and even multiple equilibria with global indeterminacy – may arise. We also draw some welfare implications and relate them to the well-known “happiness paradox” arising within contemporary affluent societies.