A Pure Hedonic Theory of Utility and Status: Unhappy but Efficient Invidious Comparisons
Pascal Courty () and
Merwan Engineer ()
No 12478, CEPR Discussion Papers from C.E.P.R. Discussion Papers
We examine status preferences where agents compare their own utility relative to the utilities of others, in addition to valuing own consumption. The utility functions are, therefore, implicit functions of each other. As long as status utility comparisons are not too intense, they do not affect either the competitive equilibrium or the set of efficient allocations. However, status utility comparison may substantially reduce average utility and dramatically increase utility inequality. Equating utility with happiness operationalizes the theory and provides an explanation to the puzzle of why invidious comparisons can generate so much unhappiness without much inefficiency. Our theory has very different welfare and political economy implications from other status theories, even when reduced form representations appear observationally equivalent.
Keywords: Conspicuous consumption; Happiness; inequality; rat race; reference group; Status; utility; welfare (search for similar items in EconPapers)
JEL-codes: D10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hap, nep-hpe, nep-mic and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at email@example.com
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:12478
Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... rs/dp.php?dpno=12478
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().