[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/97114.html
   My bibliography  Save this paper

The Formation of Social Groups under Status Concern

Author

Listed:
  • Staab, Manuel
Abstract
I study the interaction of two forces in the formation of social groups: the preference for high quality peers and the desire for status among one's peers. I present a characterization of fundamental properties of equilibrium group structures in a perfect information, simultaneous move game when group membership is priced uniformly and cannot directly depend on type. While equilibrium groups generally exhibit some form of assortative matching between individual type and peer quality, the presence of status concern reduces the potential degree of sorting and acts as a force for greater homogeneity across groups. I analyse the effect of status concern for the provision of groups under different market structures and particularly focus on the implications for segregation and social exclusion. I find that status concern reduces the potential for and benefit from segregation - both for a social planner and a monopolist - but the interaction of preference for rank and status can make the exclusion of some agents a second-best outcome.

Suggested Citation

  • Staab, Manuel, 2019. "The Formation of Social Groups under Status Concern," MPRA Paper 97114, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:97114
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/97114/1/MPRA_paper_97114.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. ,, 2009. "Monopolistic group design with peer effects," Theoretical Economics, Econometric Society, vol. 4(1), March.
    2. Demange, Gabrielle & Henriet, Dominique, 1991. "Sustainable oligopolies," Journal of Economic Theory, Elsevier, vol. 54(2), pages 417-428, August.
    3. Robert H. Frank, 2005. "Positional Externalities Cause Large and Preventable Welfare Losses," American Economic Review, American Economic Association, vol. 95(2), pages 137-141, May.
    4. Nicolas L. Bottan & Ricardo Perez-Truglia, 2022. "Choosing Your Pond: Location Choices and Relative Income," The Review of Economics and Statistics, MIT Press, vol. 104(5), pages 1010-1027, December.
    5. Zenou, Yves & Sommer, Marc, 2019. "Imperfect Information, Social Norms, and Beliefs in Networks," CEPR Discussion Papers 14087, C.E.P.R. Discussion Papers.
    6. Aumann, Robert J, 1987. "Correlated Equilibrium as an Expression of Bayesian Rationality," Econometrica, Econometric Society, vol. 55(1), pages 1-18, January.
    7. Ed Hopkins & Tatiana Kornienko, 2004. "Running to Keep in the Same Place: Consumer Choice as a Game of Status," American Economic Review, American Economic Association, vol. 94(4), pages 1085-1107, September.
    8. Benny Moldovanu & Aner Sela & Xianwen Shi, 2007. "Contests for Status," Journal of Political Economy, University of Chicago Press, vol. 115(2), pages 338-363.
    9. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 963-1002.
    10. Ashraf, Nava & Bandiera, Oriana & Lee, Scott S., 2014. "Awards unbundled: Evidence from a natural field experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 100(C), pages 44-63.
    11. Weiss, Yoram & Fershtman, Chaim, 1998. "Social status and economic performance:: A survey," European Economic Review, Elsevier, vol. 42(3-5), pages 801-820, May.
    12. Alesina, Alberto & Di Tella, Rafael & MacCulloch, Robert, 2004. "Inequality and happiness: are Europeans and Americans different?," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2009-2042, August.
    13. Bloch, Francis & Dutta, Bhaskar, 2009. "Communication networks with endogenous link strength," Games and Economic Behavior, Elsevier, vol. 66(1), pages 39-56, May.
    14. Ushchev, Philip & Zenou, Yves, 2020. "Social norms in networks," Journal of Economic Theory, Elsevier, vol. 185(C).
    15. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    16. Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
    17. Patrick Bayer & Fernando Ferreira & Robert McMillan, 2007. "A Unified Framework for Measuring Preferences for Schools and Neighborhoods," Journal of Political Economy, University of Chicago Press, vol. 115(4), pages 588-638, August.
    18. AUMANN, Robert J. & DREZE, Jacques H., 1974. "Cooperative games with coalition structures," LIDAM Reprints CORE 217, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    19. Todd D. Kendall, 2003. "Spillovers, Complementarities, and Sorting in Labor Markets with an Application to Professional Sports," Southern Economic Journal, John Wiley & Sons, vol. 70(2), pages 389-402, October.
    20. Suzanne Scotchmer, 2006. "Consumption Externalities, Rental Markets and Purchase Clubs," Studies in Economic Theory, in: Christian Schultz & Karl Vind (ed.), Institutions, Equilibria and Efficiency, chapter 19, pages 351-369, Springer.
    21. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64(5), pages 416-416.
    22. Calabrese, Stephen & Epple, Dennis & Romer, Thomas & Sieg, Holger, 2006. "Local public good provision: Voting, peer effects, and mobility," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 959-981, August.
    23. Haagsma Rein & van Mouche Pierre, 2010. "Equilibrium Social Hierarchies: A Non-Cooperative Ordinal Status Game," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-49, June.
    24. David Card & Alexandre Mas & Enrico Moretti & Emmanuel Saez, 2012. "Inequality at Work: The Effect of Peer Salaries on Job Satisfaction," American Economic Review, American Economic Association, vol. 102(6), pages 2981-3003, October.
    25. Gilat Levy & Ronny Razin, 2015. "Preferences over Equality in the Presence of Costly Income Sorting," American Economic Journal: Microeconomics, American Economic Association, vol. 7(2), pages 308-337, May.
    26. Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini, 2012. "Social Decision Theory: Choosing within and between Groups," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(4), pages 1591-1636.
    27. Cabrales, Antonio & Calvó-Armengol, Antoni & Zenou, Yves, 2011. "Social interactions and spillovers," Games and Economic Behavior, Elsevier, vol. 72(2), pages 339-360, June.
    28. Howard Pack & Janet Rothenberg Pack, 1977. "Metropolitan Fragmentation and Suburban Homogeneity," Urban Studies, Urban Studies Journal Limited, vol. 14(2), pages 191-201, June.
    29. Dennis Epple & Thomas Romer & Holger Sieg, 2001. "Interjurisdictional Sorting and Majority Rule: An Empirical Analysis," Econometrica, Econometric Society, vol. 69(6), pages 1437-1465, November.
    30. Robson, Arthur J, 1992. "Status, the Distribution of Wealth, Private and Social Attitudes to Risk," Econometrica, Econometric Society, vol. 60(4), pages 837-857, July.
    31. Stark, Oded & Taylor, J Edward, 1991. "Migration Incentives, Migration Types: The Role of Relative Deprivation," Economic Journal, Royal Economic Society, vol. 101(408), pages 1163-1178, September.
    32. Barrow, Lisa, 2002. "School choice through relocation: evidence from the Washington, D.C. area," Journal of Public Economics, Elsevier, vol. 86(2), pages 155-189, November.
    33. Becker, Gary S, 1973. "A Theory of Marriage: Part I," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 813-846, July-Aug..
    34. He, Wei & Sun, Xiang & Sun, Yeneng, 2017. "Modeling infinitely many agents," Theoretical Economics, Econometric Society, vol. 12(2), May.
    35. Christian Ghiglino & Sanjeev Goyal, 2010. "Keeping Up with the Neighbors: Social Interaction in a Market Economy," Journal of the European Economic Association, MIT Press, vol. 8(1), pages 90-119, March.
    36. Gary S. Becker & Kevin M. Murphy & Ivan Werning, 2005. "The Equilibrium Distribution of Income and the Market for Status," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 282-310, April.
    37. Christian Ghiglino & Antonella Nocco, 2017. "When Veblen meets Krugman: social network and city dynamics," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 63(2), pages 431-470, February.
    38. Bramoulle, Yann & Kranton, Rachel, 2007. "Public goods in networks," Journal of Economic Theory, Elsevier, vol. 135(1), pages 478-494, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mazali, Rogério & Rodrigues-Neto, José A., 2013. "Dress to impress: Brands as status symbols," Games and Economic Behavior, Elsevier, vol. 82(C), pages 103-131.
    2. Perez Truglia, Ricardo Nicolas, 2007. "Conspicuous consumption in the land of Prince Charming," MPRA Paper 22009, University Library of Munich, Germany, revised 22 Mar 2010.
    3. Ed Hopkins, 2008. "Inequality, happiness and relative concerns: What actually is their relationship?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 6(4), pages 351-372, December.
    4. Hopkins, Ed & Kornienko, Tatiana, 2009. "Status, affluence, and inequality: Rank-based comparisons in games of status," Games and Economic Behavior, Elsevier, vol. 67(2), pages 552-568, November.
    5. Ed Hopkins & Tatiana Kornienko, 2006. "Methods of Comparison in Games of Status," Edinburgh School of Economics Discussion Paper Series 138, Edinburgh School of Economics, University of Edinburgh.
    6. George Deltas & Eleftherios Zacharias, 2018. "Product Proliferation and Pricing in a Market with Positional Effects," Working Papers 242312853, Lancaster University Management School, Economics Department.
    7. Antinyan, Armenak & Horváth, Gergely & Jia, Mofei, 2019. "Social status competition and the impact of income inequality in evolving social networks: An agent-based model," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 79(C), pages 53-69.
    8. Tom Truyts, 2010. "Social Status In Economic Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 24(1), pages 137-169, February.
    9. Brown, Philip H. & Bulte, Erwin & Zhang, Xiaobo, 2011. "Positional spending and status seeking in rural China," Journal of Development Economics, Elsevier, vol. 96(1), pages 139-149, September.
    10. Gamannossi degl’Innocenti, Duccio & Rablen, Matthew D., 2020. "Tax evasion on a social network," Journal of Economic Behavior & Organization, Elsevier, vol. 169(C), pages 79-91.
    11. J. Atsu Amegashie, 2024. "The Importance of Social Status in a Rent-Seeking Society," CESifo Working Paper Series 10894, CESifo.
    12. Zhang, Yang & He, Longfei, 2021. "Theory and experiments on network games of public goods: inequality aversion and welfare preference," Journal of Economic Behavior & Organization, Elsevier, vol. 190(C), pages 326-347.
    13. Cardoso, Ana Rute, 2005. "Big Fish in Small Pond or Small Fish in Big Pond? An Analysis of Job Mobility," IZA Discussion Papers 1900, Institute of Labor Economics (IZA).
    14. Oege Dijk, 2017. "For whom does social comparison induce risk-taking?," Theory and Decision, Springer, vol. 82(4), pages 519-541, April.
    15. Nicolai V. Kuminoff & Jaren C. Pope, 2014. "Do “Capitalization Effects” For Public Goods Reveal The Public'S Willingness To Pay?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(4), pages 1227-1250, November.
    16. Haagsma, Rein, 2018. "Income inequality and saving in a class society: The role of ordinal status," Economics Discussion Papers 2018-12, Kiel Institute for the World Economy (IfW Kiel).
    17. Davis, Lewis S., 2018. "Political economy of growth with a taste for status," Journal of Public Economics, Elsevier, vol. 168(C), pages 35-46.
    18. Pradeep Dubey & John Geanakoplos, 2016. "Money and Status: How Best to Incentivize Work," Department of Economics Working Papers 16-02, Stony Brook University, Department of Economics.
    19. Yannis M. Ioannides, 2010. "Neighborhood Effects and Housing," Discussion Papers Series, Department of Economics, Tufts University 0747, Department of Economics, Tufts University.
    20. Bilancini, Ennio & Boncinelli, Leonardo, 2019. "Wage inequality, labor income taxes, and the notion of social status," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 13, pages 1-35.

    More about this item

    Keywords

    peer effects; status concern; public goods; network effects;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:97114. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.