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The economics of escalation

Author

Listed:
  • Fabio D’Orlando
  • Sharon Ricciotti

Abstract

Escalation is a key characteristic of many consumption behaviors that has not received theoretical attention. This paper aims to propose both a definition and a theoretical treatment of escalation in consumption. We define escalation as a subject’s attempt to obtain “more†or engage in consumption behaviors that are “more intense†on a measurable, quantitative or qualitative, objective or subjective, scale (more difficult ski slopes, stronger drugs, harder sex, better restaurants etc.), even if the subject preferred less intense consumption behaviors in the past. Further, this evolution in behavior also occurs if the budget constraint does not change. We will find endogenous and exogenous theoretical microfoundations for escalation in models of hedonic adaptation, desire for novelty, acquisition of consumption skills, rising aspirations, positional effects, and envy. However, we will also discuss the possibility that the tendency to escalate is a specific innate behavior inherent to human nature. Finally, we will propose a preliminary theoretical formalization of such behavior and indicate the possible implications of taking escalation into adequate consideration. JEL codes: B52, D11, D90, D91, I31

Suggested Citation

  • Fabio D’Orlando & Sharon Ricciotti, 2021. "The economics of escalation," Rationality and Society, , vol. 33(1), pages 106-140, February.
  • Handle: RePEc:sae:ratsoc:v:33:y:2021:i:1:p:106-140
    DOI: 10.1177/1043463120985310
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    More about this item

    Keywords

    Consumption; consumers’ behavior; escalation; hedonic adaptation; consumption skills; envy;
    All these keywords.

    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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