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Modeling Luxury Consumption: An Inter-Income Classes Study of Demand Dynamics and Social Behaviors

Anais Carlin

No 2013-13, GREDEG Working Papers from Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France

Abstract: In this paper we develop an agent-based model of conspicuous consumption built on well-established social behaviours. The process of preference formation, based on imitation and differentiation under cognitive limitations, endogenously generates class-specific consumption profiles. Considering consumption as competition among households to obtain social recognition, we find that low levels of 'social competition' increases individual well-being. Especially, the desire to imitate 'social models' of consumption appears as the main determinant of individual well-being dynamics. According to the model, public policies, when aiming to reduce income inequality, are efficient for increasing 'subjective well-being' in the economy, however, well-being improvements are low when demonstration effects and consumption standards are high.

Keywords: Preference formation; Conspicuous consumption; Agent-based model; Income inequality; Social behaviors (search for similar items in EconPapers)
JEL-codes: B52 D01 D11 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2013-04, Revised 2014-05
New Economics Papers: this item is included in nep-cwa and nep-hme
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http://www.gredeg.cnrs.fr/working-papers/GREDEG-WP-2013-13.pdf Revised version, 2014 (application/pdf)
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Working Paper: Modeling Luxury Consumption: An Inter-Income Classes Study of Demand Dynamics and Social Behaviors (2013)
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