Social comparison with ambiguity: An investment and consumption game

Yuzhe Sun and Shunming Zhang

Economics Letters, 2023, vol. 230, issue C

Abstract: This study presents an investment and consumption model with two ambiguity-averse agents whose utility depends on the opponent’s consumption. In Nash equilibrium, social comparison increases (decreases) investment and consumption for the more (less) ambiguous agent, decreasing the magnitude difference between agents. The opponent’s reduced ambiguity increases the agent’s investment and consumption by comparison incentive. However, neither rival’s ambiguity level nor comparative motivation affects the agent’s welfare in our one-period model, distinguished from conclusions in continuous time. These results have important implications for the literature about social comparison and ambiguity.

Keywords: Social comparison; Ambiguity aversion; Investment; Consumption; Nash equilibrium (search for similar items in EconPapers)
JEL-codes: C70 D81 D90 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:230:y:2023:i:c:s0165176523002847

DOI: 10.1016/j.econlet.2023.111259

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