Choosing the Joneses: Endogenous Goals and Reference Standards

24 Pages Posted: 1 Jun 2004

See all articles by Armin Falk

Armin Falk

University of Bonn - Economic Science Area; briq - Institute on Behavior & Inequality

Markus Knell

Austrian National Bank - Economic Studies Division; University of Zurich

Multiple version iconThere are 2 versions of this paper

Date Written: May 2004

Abstract

A growing economic literature stresses the importance of relative comparisons, e.g., for savings and consumption or happiness. In this literature it is usually assumed that reference standards against which people compare themselves are exogenously given. In contrast findings from social psychology suggest that people play an active role in determining their reference standards. We present a social comparison model where people choose their reference standards to serve motives of self-improvement and self-enhancement. The model predicts that reference standards increase in individuals' abilities and that thus people tend to compare themselves to similar others. The results of a questionnaire study confirm the model's prediction.

Keywords: reference standard, goals, social comparison, happiness

JEL Classification: D62, D63, H31, Z13

Suggested Citation

Falk, Armin and Knell, Markus, Choosing the Joneses: Endogenous Goals and Reference Standards (May 2004). Available at SSRN: https://ssrn.com/abstract=553910 or http://dx.doi.org/10.2139/ssrn.553910

Armin Falk (Contact Author)

University of Bonn - Economic Science Area ( email )

briq - Institute on Behavior & Inequality

Schaumburg-Lippe-Straße 5-9
Bonn, 53113
Germany

HOME PAGE: http://www.briq-institute.org/

Markus Knell

Austrian National Bank - Economic Studies Division ( email )

POB 61
Vienna, A-1011
Austria
+43 1 404 20 7205 (Phone)
+43 1 404 20 7299 (Fax)

HOME PAGE: http://www.oenb.at/

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

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