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Modeling Luxury Consumption: An Inter-Income Classes Study of Demand Dynamics and Social Behaviors

Author

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  • Anaïs Carlin

    (University of Nice Sophia Antipolis, France
    GREDEG CNRS)

Abstract

In this paper we develop an agent-based model of conspicuous consumption built on well-established social behaviours. The process of preference formation, based on imitation and differentiation under cognitive limitations, endogenously generates class-specific consumption profiles. Considering consumption as competition among households to obtain social recognition, we find that low levels of 'social competition' increases individual well-being. Especially, the desire to imitate 'social models' of consumption appears as the main determinant of individual well-being dynamics. According to the model, public policies, when aiming to reduce income inequality, are efficient for increasing 'subjective well-being' in the economy, however, well-being improvements are low when demonstration effects and consumption standards are high.

Suggested Citation

  • Anaïs Carlin, 2013. "Modeling Luxury Consumption: An Inter-Income Classes Study of Demand Dynamics and Social Behaviors," GREDEG Working Papers 2013-13, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France, revised May 2014.
    • Handle: RePEc:gre:wpaper:2013-13
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    References listed on IDEAS

    as
    1. Andreas Chai & Alessio Moneta, 2010. "Retrospectives: Engel Curves," Journal of Economic Perspectives, American Economic Association, vol. 24(1), pages 225-240, Winter.
    2. Marco Valente, 2012. "Evolutionary demand: a model for boundedly rational consumers," Journal of Evolutionary Economics, Springer, vol. 22(5), pages 1029-1080, November.
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    More about this item

    Keywords

    Preference formation; Conspicuous consumption; Agent-based model; Income inequality; Social behaviors;
    All these keywords.

    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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