Perez Truglia, Ricardo Nicolas (2007): Conspicuous consumption in the land of Prince Charming.
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People incur in conspicuous consumption as a way to get non-market goods (i.e. goods that cannot be traded in markets). In sharp contrast to the existing literature, in our model people do not want to signal wealth but some unobservable traits that, conditional on other observable information, are correlated with wealth. For instance, people work hard and buy conspicuous goods in order to signal personal traits like talent, trustworthiness and creativity, and then get non-markets goods like respect, admiration, authority, relationships, etc. Both the nature of the equilibrium and the policy implications depart dramatically from the rest of the literature. We provide an application to optimal income taxation. Finally, our model offers many explanations beyond the current reach of the literature.
|Item Type:||MPRA Paper|
|Institution:||Universidad de San Andrés|
|Original Title:||Conspicuous consumption in the land of Prince Charming|
|Keywords:||Conspicuous consumption; signaling; non-market goods; income inequality; optimal taxation; risk aversion.|
|Subjects:||H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency ; Optimal Taxation
D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions
D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency ; Cost-Benefit Analysis
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search ; Learning ; Information and Knowledge ; Communication ; Belief ; Unawareness
D - Microeconomics > D4 - Market Structure, Pricing, and Design > D49 - Other
P - Economic Systems > P1 - Capitalist Systems > P16 - Political Economy
|Depositing User:||Ricardo Perez Truglia|
|Date Deposited:||25. May 2010 01:08|
|Last Modified:||16. Feb 2013 06:59|
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