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Consumption Decisions When People Value Conformity

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  • Ulph, Alistair
  • Ulph, David

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.

Suggested Citation

  • Ulph, Alistair & Ulph, David, 2014. "Consumption Decisions When People Value Conformity," SIRE Discussion Papers 2015-16, Scottish Institute for Research in Economics (SIRE).
    • Handle: RePEc:edn:sirdps:604
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    File URL: http://hdl.handle.net/10943/604
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    References listed on IDEAS

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    1. George A. Akerlof & Rachel E. Kranton, 2000. "Economics and Identity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(3), pages 715-753.
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    6. Wolfgang Buchholz & Josef Falkinger & Dirk Rübbelke, 2014. "Non-Governmental Public Norm Enforcement in Large Societies as a Two-Stage Game of Voluntary Public Good Provision," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(6), pages 899-916, December.
    7. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-484, July.
    8. Allcott, Hunt, 2011. "Social norms and energy conservation," Journal of Public Economics, Elsevier, vol. 95(9), pages 1082-1095.
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    Cited by:

    1. Partha Dasgupta & Dale Southerton & Alistair Ulph & David Ulph, 2016. "Consumer Behaviour with Environmental and Social Externalities: Implications for Analysis and Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 65(1), pages 191-226, September.
    2. Dasgupta, Partha & Southerton, Dale & Ulph, Alistair & Ulph, David, 2014. "Consumer Behaviour in a Social Context: Implications for Environmental Policy," SIRE Discussion Papers 2015-10, Scottish Institute for Research in Economics (SIRE).

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