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Loss Aversion and Conspicuous Consumption in Networks

Abstract : We introduce loss aversion into a model of conspicuous consumption in networks. Agents allocate their income between a standard good and a status good to maximize a Cobb-Douglas utility. Agents interact over a connected network and compare their status consumption to their neighbors' average consumption. Loss aversion has a profound impact. If loss aversion is large enough relative to income heterogeneity, a continuum of Nash equilibria appears and all agents consume the same quantity of status good. Otherwise, there is a unique Nash equilibrium and richest agents earn strict status gains while poorest agents earn strict status losses.
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Preprints, Working Papers, ...
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Contributor : Elisabeth Lhuillier Connect in order to contact the contributor
Submitted on : Tuesday, April 5, 2022 - 9:32:26 AM
Last modification on : Wednesday, April 6, 2022 - 3:32:32 AM
Long-term archiving on: : Wednesday, July 6, 2022 - 6:07:38 PM


WP 2022 - Nr 06.pdf
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  • HAL Id : hal-03630455, version 1



Yann Bramoullé, Christian Ghiglino. Loss Aversion and Conspicuous Consumption in Networks. {date}. ⟨hal-03630455⟩



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