Negatively interdependent preferences

Efe A. Ok, Levent Koçkesen

    Research output: Contribution to journalArticle

    Abstract

    We develop a theory of representation of interdependent preferences that reflect the widely acknowledged phenomenon of keeping up with the Joneses (i.e. of those preferences which maintain that well-being depend on "relative standing" in the society as well as on material consumption). The principal ingredient of our analysis is the assumption that individuals desire to occupy a (subjectively) better position than their peers. This is quite a primitive starting point in that it does not give any reference to what is actually regarded as "status" in the society. We call this basic postulate negative interdependence, and study its implications. In particular, combining this assumption with some other basic postulates that are widely used in a number of other branches of the theory of individual choice, we axiomatize the relative income hypothesis, and obtain an operational representation of interdependent preferences.

    Original languageEnglish (US)
    Pages (from-to)533-558
    Number of pages26
    JournalSocial Choice and Welfare
    Volume17
    Issue number3
    DOIs
    StatePublished - 2000

    ASJC Scopus subject areas

    • Social Sciences (miscellaneous)
    • Economics and Econometrics

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