On Positional Consumption and Technological Innovation- an Agent-based Approach

João Bernardino and Tanya Araújo

No 2010/04, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: Positional behavior is a source of externalities and sets limits to wellbeing. Remedies against this market failure are defended by some authors and rejected by others, while the core of the discussion rests on the benefits and costs of applying economic instruments. One of the issues discussed is the role that the competition for positional goods may have in generating technological innovation. This paper aims to contribute to the understanding of this process by analyzing an agent-based model. We observe a plausible structure of the dynamics behind the process of generation of technological innovation by positional consumption and obtain results on the influence of some key factors on the pace of innovation, particularly those of income inequality, the Hirsch conjecture of relative increase of positional consumption with affluence, and consumer network and social neighborhood sizes.

Keywords: Positional consumption; innovation; agent-based models; Robert Frank (search for similar items in EconPapers)
Date: 2010-01
New Economics Papers: this item is included in nep-cse, nep-ino and nep-knm
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