Consumption Decisions When People Value Conformity

Alistair Ulph and David Ulph

No 2015-16, SIRE Discussion Papers from Scottish Institute for Research in Economics (SIRE)

Abstract: In this paper we assume that for some commodities individuals may wish to adjust their levels of consumption from their normal Marshallian levels so as to match the consumption levels of a group of other individuals, in order to signal that they conform to the consumption norms of that group. Unlike Veblen's concept of conspicuous consumption this can mean that some individuals may reduce their consumption of the relevant commodities. We model this as a three-stage game in which individuals first decide whether or not they wish to adhere to a norm, then decide which norm they wish to adhere to, and finally decide their actual consumption. We present a number of examples of the resulting equilibria, and then discuss the potential policy implications of this model.

Keywords: strength of adherence to norms; desire for conformity; norm-consistent consumption interval; participation-consistent consumption interval; Nash equilibrium of three-stage game (search for similar items in EconPapers)
Date: 2014-10
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:edn:sirdps:604

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