Loss Aversion and Conspicuous Consumption in Networks

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Date

5 avril 2022

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HAL-SHS : économie et finance

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Archives ouvertes

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Centre pour la communication scientifique directe

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info:eu-repo/semantics/OpenAccess

Mots-clés En

Loss Aversion Conspicuous Consumption Social Networks

Sujets proches En

Agency (Philosophy) Agents Person (Philosophy) Aversion, Loss

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Yann Bramoullé et al., « Loss Aversion and Conspicuous Consumption in Networks », HAL-SHS : économie et finance, ID : 10670/1.has107

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We introduce loss aversion into a model of conspicuous consumption in networks. Agents allocate their income between a standard good and a status good to maximize a Cobb-Douglas utility. Agents interact over a connected network and compare their status consumption to their neighbors' average consumption. Loss aversion has a profound impact. If loss aversion is large enough relative to income heterogeneity, a continuum of Nash equilibria appears and all agents consume the same quantity of status good. Otherwise, there is a unique Nash equilibrium and richest agents earn strict status gains while poorest agents earn strict status losses.

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