Relative Consumption with Multiple Reference Points Under Uncertainty

• Autorzy: Kármen Kovács
• Języki publikacji: EN

Abstrakty

EN

According to the behavioural economic perspective, an individual's consumer utility derives not only from their absolute consumption but also how much they consume relative to others, that is, relative consumption matters. The purpose of this paper is to study relative consumption by focusing on social comparison, multiple reference points, and uncertainty related to the expectations about others' future consumption. The model presented reflects the dynamics and intertemporal effects of relative consumption concerning consumer utility. The purpose of the model is to describe, by applying theoretical comparative analysis, how an individual's consumer utility derived from relative consumption can change when their social reference points' future absolute consumption level is uncertain. When an individual wants to improve or at least sustain their relative consumption in the future, they have to take into account and estimate the future absolute consumption levels of the persons belonging to their reference group. However, neighbours' future consumption is usually uncertain, thus, the likely outcomes are illustrated with various cases. The study concludes that higher absolute consumption level not necessarily provides higher consumer utility when positional concerns matter. Further, despite investments in positional goods, the misprediction of others' future absolute consumption level can result in lower social standing. (original abstract)

Słowa kluczowe

EN

Consumption; Consumption patterns; Consumption theory; Consumer

PL

Konsumpcja; Wzorce konsumpcji; Teoria konsumpcji; Konsument

• Czasopismo: Economics & Sociology
• Rocznik: 2020
• Tom: 13
• Numer: nr 4
• Strony: 61--80

Twórcy

autor

Kármen Kovács

• University of Pécs, Hungary

Bibliografia

• Akerlof, G. A. (1997). Social distance and social decisions. Econometrica, 65(5), 1005-1027. https://doi.org/10.2307/2171877
• Alicke, M. D. (2007). In defense of social comparison. Revue Internationale de Psychologie Sociale, 20(1), 12-29.
• Alpizar, F., Carlsson, F., & Johansson-Stenman, O. (2005). How much do we care about absolute versus relative income and consumption?. Journal of Economic Behavior & Organization, 56(3), 405-421. https://doi.org/10.1016/j.jebo.2002.10.007
• Aronsson, T., & Johansson-Stenman, O. (2014). Positional preferences in time and space: Optimal income taxation with dynamic social comparisons. Journal of Economic Behavior & Organization, 101, 1-23. https://doi.org/10.1016/j.jebo.2014.01.004
• Ball, S., Eckel, C., Grossman, P. J., & Zame, W. (2001). Status in markets. Quarterly Journal of Economics, 116(1), 161-188. https://doi.org/10.1162/003355301556374
• Bilancini, E., & Boncinelli, L. (2008). Ordinal vs cardinal status: Two examples. Economics Letters, 101(1), 17-19. https://doi.org/10.1016/j.econlet.2008.03.027
• Birdal, M., & Ongan, H. (2016). Why do we care about having more than others? Socioeconomic determinants of positional concerns in different domains. Social Indicators Research, 126(2), 727-738. https://doi.org/10.1007/s11205-015-0914-9
• Brekke, K. A., Howarth, R. B., & Nyborg, K. (2003). Status-seeking and material affluence: Evaluating the Hirsch hypothesis. Ecological Economics, 45(1), 29-39. https://doi.org/10.1016/s0921-8009(02)00262-8
• Bronner, F., & de Hoog, R. (2018). Conspicuous consumption and the rising importance of experimental purchases. International Journal of Market Research, 60(1), 88-103. https://doi.org/10.1177/1470785317744667
• Bucciol, A., Cavasso, B., & Zarri, L. (2015). Social status and personality traits. Journal of Economic Psychology, 51, 245-260. https://doi.org/10.1016/j.joep.2015.10.002
• Carlsson, F., Johansson-Stenman, O., & Martinsson, P. (2007). Do you enjoy having more than others? Survey evidence of positional goods. Economica, 74(296), 586-598. https://doi.org/10.1111/j.1468-0335.2006.00571.x
• Celse, J., Galia, F., & Max, S. (2017). Are (negative) emotions to blame for being positional? An experimental investigation of the impact of emotional states on status preferences. Journal of Behavioural and Experimental Economics, 67, 122-130. https://doi.org/10.1016/j.socec.2016.12.004
• Clark, A. E., & Oswald, A. J. (1998). Comparison-concave utility and following behavior in social and economic settings. Journal of Public Economics, 70(1), 133-155. https://doi.org/10.1016/s0047-2727(98)00064-4
• Duesenberry, J. S. (1949). Income, Saving and the Theory of Consumer Behavior. Cambridge, MA: Harvard University Press.
• Festinger, L. (1954). A theory of social comparison processes. Human Relation, 7(2), 117-140. https://doi.org/10.1177/001872675400700202
• Frank, R. H. (1985a). Choosing the Right Pond: Human Behavior and the Quest for Status. New York: Oxford University Press.
• Frank, R. H. (1985b). The demand for unobservable and other nonpositional goods. American Economic Review, 75(1), 101-116.
• Frank, R. H. (2005). Positional externalities cause large and preventable welfare losses. American Economic Review, 95(2), 137-141. https://doi.org/10.1257/000282805774670392
• Galbraith, J. K. (1958). The Affluent Society. Boston, MA: Houghton Mifflin.
• Garcia, S. M., Tor, A., & Schiff, T. M. (2013). The psychology of competition: A social comparison perspective. Perspectives on Psychological Science, 8(6), 634-650. https://doi.org/10.1177/1745691613504114
• Goerke, L. (2013). Relative consumption and tax evasion. Journal of Economic Behavior & Organization, 87, 52-65. https://doi.org/10.1016/j.jebo.2012.12.028
• Grolleau, G., & Saїd, S. (2008). Do you prefer having more or more than others? Survey evidence on positional concerns in France. Journal of Economic Issues, 42(4), 1145-1158. https://doi.org/10.1080/00213624.2008.11507206
• Grolleau, G., Mzoughi, N., & Saїd, S. (2012). Do you believe that others are more positional than you? Results from an empirical survey on positional concerns in France. Journal of Socio-Economics, 41(1), 48-54. https://doi.org/10.1016/j.socec.2011.10.001
• Heath, C., Larrick, R. P., & Wu, G. (1999). Goals as reference points. Cognitive Psychology, 38(1), 79-109. https://doi.org/10.1006/cogp.1998.0708
• Hirsch, F. (1976). Social Limits to Growth. Cambridge, MA: Harvard University Press.
• Hopkins, E., & Kornienko, T. (2004). Running to keep in the same place: Consumer choice as a game of status. American Economic Review, 94(4), 1085-1107. https://doi.org/10.1257/0002828042002705
• Hopkins, E., & Kornienko, T. (2009). Status, affluence, and inequality: Rank-based comparisons in games of status. Games and Economic Behavior, 67(2), 552-558. https://doi:10.1016/j.geb.2009.02.004
• Kahneman, D. (1992). Reference points, anchors, norms, and mixed feelings. Organizational Behavior and Human Decision Processes, 51(2), 296-312. https://doi.org/10.1016/0749-5978(92)90015-y
• Kahneman, D., & Tversky, A. (1984). Choices, values, and frames. American Psychologist, 39(4), 341-350. https://doi.org/10.1037//0003-066x.39.4.341
• Keynes, J. M. (1936/1996). The General Theory of Employment, Interest and Money. London: Macmillan; New York: University of Chicago Press.
• Knight, F. H. (1921). Risk, Uncertainty, and Profit. Boston, MA: Hart, Schaffner & Marx-Houghton Mifflin Co.
• Koop, G. J., & Johnson, J. G. (2012). The use of multiple reference points in risky decision making. Journal of Behavioral Decision Making, 25(1), 49-62. https://doi.org/10.1002/bdm.713
• Kőszegi, B., & Rabin, M. (2009). Reference-dependent consumption plans. American Economic Review, 99(3), 909-936. https://doi.org/10.1257/aer.99.3.909
• Leguizamon, S. (2016). Who cares about relative status? A quantile approach to consumption of relative house size. Applied Economics Letters, 23(5), 307-312. https://doi.org/10.1080/13504851.2015.1066485
• Lu, J., Xie, X., Wang, M., & Tang, X. (2015). Double reference points: The effects of social and financial reference points on decisions under risk. Journal of Behavioral Decision Making, 28(5), 451-463. https://doi.org/10.1002/bdm.1862
• Ordóñez, L. D., Connolly, T., & Coughlan, R. (2000). Multiple reference points in satisfaction and fairness assessment. Journal of Behavioral Decision Making, 13(3), 329-344. https://doi.org/10.1002/1099-0771(200007/09)13:3<329::aid-bdm356>3.0.co;2-q
• Pigou, A. C. (1903). Some remarks on utility. The Economic Journal, 13(49), 58-68. https://doi.org/10.2307/2956866
• Pigou, A. C. (1913). The interdependence of different sources of demand and supply in a market. The Economic Journal, 23(89), 19-24. https://doi.org/10.2307/2222206
• Rayo, L., & Becker, G. S. (2007). Evolutionary efficiency and happiness. Journal of Political Economy, 115(2), 302-337. https://doi.org/10.1086/516737
• Rohde, I. M. T., & Rohde, K. I. M. (2011). Risk attitudes in a social context. Journal of Risk and Uncertainty, 43(3), 205-225. https://doi.org/10.1007/s11166-011-9127-z
• Rustichini, A., DeYoung, C. G., Anderson, J. E., & Burks, S. V. (2016). Toward the integration of personality theory and decision theory in explaining economic behavior: An experimental investigation. Journal of Behavioral and Experimental Economics, 64, 122-137. https://doi.org/10.1016/j.socec.2016.04.019
• Schwartz, B., Ward, A., Monterosso, J., Lyubomirsky, S., White, K., & Lehman, D. R. (2002). Maximizing versus satisficing: happiness is a matter of choice. Journal of Personality and Social Psychology, 83(5), 1178-1197. https://doi.org/10.1037//0022-3514.83.5.1178
• Scitovsky, T. (1976). The Joyless Economy: The Psychology of Human Satisfaction. New York: Oxford University Press.
• Simon, H. A. (1956). Rational choice and the structure of the environment. Psychological Review, 63(2), 129-138. https://doi.org/10.1037/h0042769
• Smith, A. (1776/1976). An Inquiry into the Nature and Causes of the Wealth of Nations. Chicago: University of Chicago Press.
• Solnick, S. J., & Hemenway, D. (1998). Is more always better?: A survey on positional concerns. Journal of Economic Behavior & Organization, 37(3), 373-383. https://doi.org/10.1016/s0167-2681(98)00089-4
• Solnick, S. J., & Hemenway, D. (2005). Are positional concerns stronger in some domains than in others? American Economic Review, 95(2), 147-151. https://doi.org/10.1257/000282805774669925
• Solnick, S. J., Hong, L., & Hemenway, D. (2007). Positional goods in the United States and China. The Journal of Socio-Economics, 36(4), 537-545. https://doi.org/10.1016/j.socec.2006.12.012
• Van de Ven, N., Zeelenberg, M., & Pieters, R. (2009). Leveling up and down: The experiences of benign and malicious envy. Emotion, 9(3), 419-429. https://doi.org/10.1037/a0015669
• Veblen, T. (1899/1979). The Theory of the Leisure Class. Harmondsworth: Penguin Books.
• Wang, H., Cheng, Z., & Smyth, R. (2019). Consumption and happiness. The Journal of Development Studies, 55(1), 120-136. https://doi.org/10.1080/00220388.2017.1371294
• Wang, X. T., & Johnson, J. G. (2012). A tri-reference point theory of decision making under risk. Journal of Experimental Psychology: General, 141(4), 743-756. https://doi.org/10.1037/a0027415
• Weaver, K., Daniloski, K., Schwarz, N., & Cottone, K. (2015). The role of social comparison for maximizers and satisficers: Wanting the best or wanting to be the best? Journal of Consumer Psychology, 25(3), 372-388. https://doi.org/10.1016/j.jcps.2014.10.003
• Yang, W., & Mattila, A. S. (2017). The impact of status seeking on consumers' word of mouth and product preference - A comparison between luxury hospitality services and luxury goods. Journal of Hospitality & Tourism Research, 41(1), 3-22. https://doi.org/10.1177/1096348013515920

Identyfikatory

DOI

10.14254/2071-789X.2020/13-4/4