Conspicuous consumption, snobbism and conformism

Corneo, Giacomo; Jeanne, Olivier

doi:10.1016/s0047-2727(97)00016-9

Cited by 376 publications

(248 citation statements)

References 9 publications

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“…Bagwell and Bernheim (1996) argue that the relationship between price and demand should emerge in equilibrium, and derive conditions for such "Veblen effects" to arise in equilibrium. Corneo and Jeanne (1997) establish that conspicuous consumption might emerge as a tool to signal wealth. While economics literature has focussed on when Veblen effects may emerge in market equilibrium, the pricing and demand management decisions of a firm facing conspicuous consumers have been relatively underexplored.…”

Section: Our Position In the Literaturementioning

confidence: 98%

Selling to Conspicuous Consumers: Pricing, Production, and Sourcing Decisions

2012

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Consumers often purchase goods that are "hard to find" to conspicuously display their exclusivity and social status. Firms that produce such conspicuously consumed goods such as designer apparel, fashion goods, jewelry, etc., often face challenges in making optimal pricing and production decisions. Such firms are confronted with precipitous tradeoff between high sales volume and high margins, due to the highly uncertain market demand, strategic consumer behavior, and the display of conspicuous consumption. In this paper, we propose a model that addresses pricing and production decisions for a firm, using the rational expectations framework. We show that, in equilibrium, firms may offer high availability of goods despite the presence of conspicuous consumption. We show that scarcity strategies are harder to adopt as demand variability increases, and we provide conditions under which scarcity strategies could be successfully adopted to improve profits. Finally, to credibly commit to scarcity strategy, we show that firms can adopt sourcing strategies, such as sourcing from an expensive production location/supplier or using expensive raw materials, that signal deeper investment in unit production costs.

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Section: Our Position In the Literaturementioning

confidence: 98%

Selling to Conspicuous Consumers: Pricing, Production, and Sourcing Decisions

2012

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“…These studies find that, in addition to their own levels of consumption, individuals care about their peers' consumption levels and their wealth rank relative to their comparison group, which validates the use of reduced-form models such as equation 1. For instance, see Cole et al (1992); Corneo and Jeanne (1997);. Boskin and Sheshinski (1978) and Oswald (1983) theoretically analyze tax policy implications of relative utility, while Abel (1990); Bakshi and Chen (1996); Gali (1994);and Campbell and Cochrane (1999) examined such relative effects on asset pricing.…”

Section: Data Descriptionmentioning

confidence: 99%

The Relative Utility Hypothesis With and Without Self-Reported Reference Wages

et al. 2010

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThis article uses survey data of 90,000 union employees working in 62 publicly-traded companies in Japan between 1990 and 2004 to study the effect of both own and self-reported reference wages on workers' subjective well-being levels. The availability of self-reported reference wages generates very robust findings that do not depend on questionable identifying assumptions. These findings confirm that higher estimates by workers of their peers' earnings are associated with lower levels of life and job satisfaction. These comparison effects are statistically and economically strong but are smaller in absolute value than the impact of workers' own wages on their own utility. We compare our results with standard tests of the relative utility hypothesis in the literature that recur to alternative proxies for comparison wages, including: (i) Mincer-predicted wages; (ii) cell averages defined over different groups within our dataset; (iii) cell wage averages estimated from an external data source; and (iv) colleagues' average wages. In spite of their potential flaws-that we discuss-these alternative empirical constructs employed in the literature do not introduce a simple classical measurement error problem and the bias attributed to this measurement error issue can go in both directions. We propose a simple IV strategy when the self-reported reference wage is not available that does not eliminate the bias but delivers a lower bound of the "true" effect. We also address the issue of endogeneity of self-reported reference wages in our subjective well-being regressions by accounting for workers' pessimistic attitudes at the workplace.

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“…1 Tax and other policy implications of such comparisons have more recently been explored from different points of departure in a number of studies, including Boskin and Sheshinski (1978), Oswald (1983), Tuomala (1990), Persson (1995), Corneo and Jeanne (1997), Ljungqvist and Uhlig (2000), Dupor and Liu (2003), Abel (2005), Frank (2008), and Aronsson and JohanssonStenman (2008. 2 A typical finding in this literature is that the externalities generated by relative consumption concerns motivate considerably higher marginal tax rates than in the conventional model of optimal taxation without social comparisons.…”

Section: Introductionmentioning

confidence: 99%

Paternalism against Veblen: Optimal Taxation and Non-respected Preferences for Social Comparisons

Aronsson

Johansson‐Stenman²

2018

American Economic Journal: Economic Policy

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This paper deals with optimal income taxation and relative consumption under a welfarist government that fully respects people's preferences and a paternalist government that does not share the consumer preference for relative consumption.Consistent with previous findings, relative consumption concerns typically lead to higher marginal income tax rates in the welfarist case. A remarkable result is that the optimal tax rules turn out to be very similar when people's preferences for social comparisons are not respected. Indeed, if the relative consumption concerns are based on mean value comparisons and all consumers are equally positional, or if they are driven by within-type comparisons, the paternalist and welfarist governments can implement their respective first-best allocations through exactly the same marginal income tax formulas. Yet, also in these cases, there are some remaining differences that follow from second-best considerations.

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Conspicuous consumption, snobbism and conformism

Cited by 376 publications

References 9 publications

Selling to Conspicuous Consumers: Pricing, Production, and Sourcing Decisions

Selling to Conspicuous Consumers: Pricing, Production, and Sourcing Decisions

The Relative Utility Hypothesis With and Without Self-Reported Reference Wages

Paternalism against Veblen: Optimal Taxation and Non-respected Preferences for Social Comparisons

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