Keeping Up with The Joneses: Reference-Dependent Choice with Social Comparisons†

• 成果类型: Article
• 署名作者: Langtry, Alastair
• 署名单位: University of Cambridge; University of London; King's College London
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MICROECONOMICS
• ISSN/ISSBN: 1945-7669
• DOI: 10.1257/mic.20220088
• 发表日期: 2023
• 页码: 474-500
• 关键词: Relative income; prospect-theory; happiness; networks; MODEL; externalities; connections; INEQUALITY; EMPLOYMENT; neighbors

摘要

Keeping up with The Joneses matters. This paper examines a model of reference-dependent choice where reference points are determined by social comparisons. An increase in the strength of social comparisons, even by only a few agents, increases consumption and decreases welfare for everyone. Strikingly, a higher marginal cost of consumption can increase welfare. In a labor market, social comparisons with coworkers create a big fish in a small pond effect, inducing incomplete labor market sorting. Further, it is the skilled workers with the weakest social networks who are induced to give up income to become the big fish. (JEL D85, J22, J24, J61)