Choosing the Joneses: Endogenous Goals and Reference Standards

Armin Falk and Markus Knell

No 4459, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: A growing economic literature stresses the importance of relative comparisons, e.g., for savings and consumption or happiness. In this literature it is usually assumed that reference standards against which people compare themselves are exogenously given. In contrast, findings from social psychology suggest that people play an active role in determining their reference standards. We present a social comparison model where people choose their reference standards to serve motives of self-improvement and self-enhancement. The model predicts that reference standards increase in individuals? abilities and that people therefore tend to compare themselves to similar others. The results of a questionnaire study confirm the model?s prediction.

Keywords: Reference standards; Goals; Social comparison; Happiness (search for similar items in EconPapers)
JEL-codes: D62 D63 H31 (search for similar items in EconPapers)
Date: 2004-06
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Citations: View citations in EconPapers (187)

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Journal Article: Choosing the Joneses: Endogenous Goals and Reference Standards (2004)
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