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

Anais Carlin, Sébastien Verel () and Philippe Collard ()
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Sébastien Verel: LISIC - Laboratoire d'Informatique Signal et Image de la Côte d'Opale - ULCO - Université du Littoral Côte d'Opale
Philippe Collard: Laboratoire d'Informatique, Signaux, et Systèmes de Sophia-Antipolis (I3S) / Groupe SCOBI - Laboratoire I3S - MDSC - Modèles Discrets pour les Systèmes Complexes - I3S - Laboratoire d'Informatique, Signaux, et Systèmes de Sophia Antipolis - UNS - Université Nice Sophia Antipolis (... - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015-2019) - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur

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Abstract: We start from the observation that theoretical studies of luxury consumption are relatively rare in the economic analysis. In fact, while homothetic preferences simply cannot address the issue of luxury consumption, the use of non-homothetic preferences is restricted, at least in standard models, by the absence of consensus about the nature of luxury goods. Using the agent-based computational economics methodology, we, therefore, choose to de ne a luxurious item by its ability to display social statute. We, rst, put our analysis in perspective via a short revue of the main contributions about consumption behavior in social context. Through this revue, we identify a few social phenomenons involved in the formation of individual preferences: imitation, diferentiation and innovation. Second, building on these simple social behaviors, we develop a model of luxury preference formation, in which preferences evolve endogenously. Third, we explore the emerging properties of the model, especially, under which conditions we observe a specialization of consumption by social classes. Finally we analyzes the impact of "Veblen e ect" on consumption behaviors.

Keywords: Preference formation; Consumption; Luxury good; Agent-based model; Income classes (search for similar items in EconPapers)
Date: 2013-06-20
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Published in Annual Workshop on the Economic Science with Heterogeneous Interacting Agents (WEHIA), Jun 2013, Reykjavik, Iceland

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