 Running to Keep in the Same Place: Consumer Choice as a Game of StatusEd Hopkins and Tatiana Kornienko Edinburgh School of Economics Discussion Paper Series from Edinburgh School of Economics, University of Edinburgh Abstract: We investigate consumer choice where individuals care not only about the absolute values of consumption, but also about their status. This is defined as their ordinal rank in the distribution of consumption of one "positional" good. In such a situation, the consumer’s problem becomes strategic as her utility will depend on the consumption choices of others. In the symmetric Nash equilibrium of the resulting game, each individual spends more on visible consumption than in the absence of a concern for status and has lower utility. Treating status endogenously allows us to analyze how exogenous changes in the distribution of income can affect individual choices. In a more affluent society, individuals spend a higher proportion of their income on the positional good, which leads to a reduction in utility at each income level. In a more equal society those with lower incomes spend more on conspicuous consumption and are worse off. We go on to analyze externality-correcting consumption taxes and subsidies. Keywords: status; relative standing; income inequality; ratio orderings; consumption externalities (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:edn:esedps:92 Access Statistics for this paper More papers in Edinburgh School of Economics Discussion Paper Series from Edinburgh School of Economics, University of Edinburgh 31 Buccleuch Place, EH8 9JT, Edinburgh. Contact information at EDIRC. |
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