Negatively Interdependent Preferences

Posted: 15 Jan 2001

See all articles by Efe A. Ok

Efe A. Ok

Leonard N. Stern School of Business - Department of Economics

Levent Kockesen

Koc University - Department of Economics

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.

JEL Classification: D00

Suggested Citation

Ok, Efe A. and Kockesen, Levent, Negatively Interdependent Preferences. Available at SSRN: https://ssrn.com/abstract=228183

Efe A. Ok (Contact Author)

Leonard N. Stern School of Business - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States
212-998-8920 (Phone)
212-995-4186 (Fax)

Levent Kockesen

Koc University - Department of Economics ( email )

Rumeli Feneri Yolu
Sariyer 80910, Istanbul
Turkey

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