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Social comparison with ambiguity: An investment and consumption game

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  • Sun, Yuzhe
  • Zhang, Shunming

Abstract

This study presents an investment and consumption model with two ambiguity-averse agents whose utility depends on the opponent’s consumption. In Nash equilibrium, social comparison increases (decreases) investment and consumption for the more (less) ambiguous agent, decreasing the magnitude difference between agents. The opponent’s reduced ambiguity increases the agent’s investment and consumption by comparison incentive. However, neither rival’s ambiguity level nor comparative motivation affects the agent’s welfare in our one-period model, distinguished from conclusions in continuous time. These results have important implications for the literature about social comparison and ambiguity.

Suggested Citation

  • Sun, Yuzhe & Zhang, Shunming, 2023. "Social comparison with ambiguity: An investment and consumption game," Economics Letters, Elsevier, vol. 230(C).
    • Handle: RePEc:eee:ecolet:v:230:y:2023:i:c:s0165176523002847
    DOI: 10.1016/j.econlet.2023.111259
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Social comparison; Ambiguity aversion; Investment; Consumption; Nash equilibrium;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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