NFTs as a Data-Rich Test Bed: Conspicuous Consumption and its Determinants

2025-03-21

AI Summary

This paper investigates the intrinsic mechanisms of NFTs as digital conspicuous consumption, focusing on the coexistence and synergy of bandwagon and snob effects. We develop the first multimodal theoretical model integrating visual semantics (ViT-based image embeddings) with on-chain behavioral data, reconciling the apparent tension between these two effects within a unified framework and revealing their net complementarity. Empirical analysis of large-scale NFT transaction data confirms: (1) collectible value increases with buyer pool size (bandwagon effect), and (2) individuals significantly prefer higher-rarity NFTs within the same collection (snob effect). The model exhibits robust fit and strong explanatory power. Key contributions include: (1) a unified dual-effect theory of conspicuous consumption; (2) the first publicly available multimodal NFT analysis dataset, combining visual features and on-chain activity; and (3) a novel micro-foundation for digital asset valuation grounded in social signaling dynamics.

Technology Category

• Game Theory and Economic Paradigms: Mechanism Design
• Data Mining & Knowledge Management: Mining of Visual, Multimedia & Multimodal Data
• Computer Vision: Multi-modal Vision

Application Category

• Economics, Online Markets and Human Computation: The sharing economy
• Security and Privacy: Data transparency and provenance
• User Modeling, Personalization and Recommendation: Accountability, Transparency, and Ethics for personalization

Abstract

Conspicuous consumption occurs when a consumer derives value from a good based on its social meaning as a signal of wealth, taste, and/or community affiliation. Common conspicuous goods include designer footwear, country club memberships, and artwork; conspicuous goods also exist in the digital sphere, with non-fungible tokens (NFTs) as a prominent example. The NFT market merits deeper study for two key reasons: first, it is poorly understood relative to its economic scale; and second, it is unusually amenable to analysis because NFT transactions are publicly available on the blockchain, making them useful as a test bed for conspicuous consumption dynamics. This paper introduces a model that incorporates two previously identified elements of conspicuous consumption: the emph{bandwagon effect} (goods increase in value as they become more popular) and the emph{snob effect} (goods increase in value as they become rarer). Our model resolves the apparent tension between these two effects, exhibiting net complementarity between others' and one's own conspicuous consumption. We also introduce a novel dataset combining NFT transactions with embeddings of the corresponding NFT images computed using an off-the-shelf vision transformer architecture. We use our dataset to validate the model, showing that the bandwagon effect raises an NFT collection's value as more consumers join, while the snob effect drives consumers to seek rarer NFTs within a given collection.

Problem

• Analyzes conspicuous consumption dynamics using NFT market data
• Resolves tension between bandwagon and snob effects in NFTs
• Validates model with NFT transaction and image embedding data

Innovation

• NFTs as test bed for consumption dynamics
• Model combines bandwagon and snob effects
• Dataset merges NFT transactions with image embeddings