Consumption decisions when people value conformity

David Tregear Ulph, Alistair Ulph

    Research output: Working paperDiscussion paper

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    Abstract

    In this paper we assume that for some commodities individuals may wish to adjust their levels of consumption from their normal Marshallian levels so as to match the consumption levels of a group of other individuals, in order to signal that they conform to the consumption norms of that group. Unlike Veblen’s concept of conspicuous consumption this can mean that some individuals may reduce their consumption of the relevant commodities. We model this as a three-stage game in which individuals first decide whether or not they wish to adhere to a norm, then decide which norm they wish to adhere to, and finally decide their actual consumption. We present a number of examples of the resulting equilibria, and then discuss the potential policy implications of this model.
    Original languageEnglish
    PublisherUniversity of St Andrews
    Pages1-29
    Number of pages29
    Publication statusPublished - 1 Oct 2014

    Publication series

    NameSchool of Economics & Finance Discussion Paper
    PublisherUniversity of St Andrews
    No.1414
    ISSN (Print)0962-4031
    ISSN (Electronic)2055-303X

    Keywords

    • strength of adherence to norms
    • desire for conformity
    • norm-consistent consumption interval
    • participation-consistent consumption interval
    • Nash equilibrium of three-stage game

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