The Joneses Visit an Economics Lab

2026-07-08

AI Summary

This study investigates how individual consumption is influenced by peer consumption comparisons, distinguishing between social preference motives such as "keeping up with the Joneses" and conspicuous consumption. Using a laboratory experiment under conditions where peers’ choices are observable, the authors develop a unified framework to compare seven quasi-linear preference models. Notably, they incorporate the value function from prospect theory into social comparison modeling for the first time, explicitly differentiating upward (envy-driven) and downward (pride-driven) comparisons. The findings reveal that observability of peers’ choices significantly amplifies conspicuous consumption. Moreover, the model integrating an envy–pride structure derived from prospect theory achieves the best empirical fit, offering novel evidence for the Veblen effect and highlighting both the presence and behavioral mechanism of status-seeking motives in consumption decisions.

Abstract

Existing literature offers persuasive evidence that individuals care about how their consumption compares to that of peers, and proposes a large variety of explanatory models. The present paper proposes a common framework for many of those models, and compares their ability to predict behavior in a laboratory experiment. We find evidence of Keeping up with the Joneses motivations but also find that conspicuous consumption is enhanced by Veblen motivations arising from peers' ability to observe one's own choice. Among the seven quasi-linear preference models we compare, our data are best explained by a model that contrasts envy and pride (upward vs downward comparisons) using a value function borrowed from Prospect Theory.

Problem

• Keeping up with the Joneses
• conspicuous consumption
• Veblen effect
• social comparison
• preference models

Innovation

• Keeping up with the Joneses
• Veblen effect
• Prospect Theory
• social comparison
• conspicuous consumption