Conspicuous Consumption, Social Status and Clubs

28 Pages Posted: 2 Oct 2000

See all articles by Hubert Kempf

Hubert Kempf

Ecole Normale Superieure de Cachan (ENS); National Research University Higher School of Economics

Fabien Moizeau

Université Paris I Panthéon-Sorbonne - Equipe Universitaire de Recherche en Economie Quantitative (EUREQUA)

Fernando Jaramillo

Universidad del Rosario - Faculty of Economics

Date Written: July 2000

Abstract

The paper develops a signalling theory of conspicuous consumption where the drive toward spending on an otherwise unuseful good comes from the desire to enter clubs and benefit from the provision of club good financed by members of a club and from a social status effect. Individual incomes are unobserved and admission to a club is based on the inference of an individual's capacity to contribute to the public good. By entering in a club, individuals also gain a certain social status. This inference in turn is based on the signal emitted by spending on a conspicuous good. Because of the joint incentives of club good and social status, people may be induced to overspend in the conspicuous good. We characterise both the pooling equilibria and the separating equilibria of the signalling game played by individuals. We then ask whether taxation can be Pareto-improving and which tax scheme would be chosen by the median voter in this society.

JEL Classification: E21, H20

Suggested Citation

Kempf, Hubert and Moizeau, Fabien and Jaramillo, Fernando, Conspicuous Consumption, Social Status and Clubs (July 2000). FEEM Working Paper No. 58.00, Available at SSRN: https://ssrn.com/abstract=237455 or http://dx.doi.org/10.2139/ssrn.237455

Hubert Kempf (Contact Author)

Ecole Normale Superieure de Cachan (ENS) ( email )

61 avenue du président Wilson
Cachan, Paris 94235
France

National Research University Higher School of Economics

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

Fabien Moizeau

Université Paris I Panthéon-Sorbonne - Equipe Universitaire de Recherche en Economie Quantitative (EUREQUA) ( email )

106-112 Boulevard de l'Hopital
Paris Cedex 13, 75647
France

Fernando Jaramillo

Universidad del Rosario - Faculty of Economics ( email )

Casa Pedro Fermín
Calle 14 # 4-69
Bogota
Colombia

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