The expected price of keeping up with the Joneses

Olivier Armantier, Antonio Filippin, Michael Neubauer and Luca Nunziata

Journal of Economic Behavior & Organization, 2022, vol. 200, issue C, 1203-1220

Abstract: Inflation expectations elicited in surveys have been found to exhibit large dispersion across individuals. Although several explanations have been proposed, none fully explain this puzzle. We explore in this paper a new behavioral factor: social comparison. Using original survey data, we find that respondents who feel they are falling behind compared to their peers report significantly and substantially higher inflation expectations. We argue that this result is consistent with an experience based belief formation model in which those unable to “keep up with the Joneses” overweight the high prices of “aspiration” goods they are unable to purchase.

Keywords: Inflation expectations; Social comparison; Inequality (search for similar items in EconPapers)
JEL-codes: D63 E03 E21 E31 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:200:y:2022:i:c:p:1203-1220

DOI: 10.1016/j.jebo.2020.07.022

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