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  3. American Economic Review
  4. September 2004
  5. Running to Keep in the Same Place: Consumer Choice as a Game of Status

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Running to Keep in the Same Place: Consumer Choice as a Game of Status

  • Ed Hopkins
  • Tatiana Kornienko
American Economic Review
vol. 94, no. 4, September 2004
(pp. 1085–1107)
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Abstract

If individuals care about their status, defined as their rank in the distribution of consumption of one "positional" good, then the consumer's problem is strategic as her utility depends on the consumption choices of others. In the symmetric Nash equilibrium, each individual spends an inefficiently high amount on the status good. Using techniques from auction theory, we analyze the effects of exogenous changes in the distribution of income. In a richer society, almost all individuals spend more on conspicuous consumption, and individual utility is lower at each income level. In a more equal society, the poor are worse off.

Citation

Hopkins, Ed, and Tatiana Kornienko. 2004. "Running to Keep in the Same Place: Consumer Choice as a Game of Status." American Economic Review, 94 (4): 1085–1107. DOI: 10.1257/0002828042002705

JEL Classification

  • D11 Consumer Economics: Theory
  • D31 Personal Income, Wealth, and Their Distributions
  • D62 Externalities