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Chapter 2 (Introduction (Needs are necessary for conspicuous consumption…
Chapter 2
Introduction
Needs are necessary for conspicuous consumption
Needs are controversial - and conspicuous consumption is futile. What can you say about status consumption - when it is ill-defined? Status differences exist and so do visible consumption. Is it merely a state of social inequality. Consumers engage in it as long as they realise they're inferior. Status competition requires everyone to compete - some compete with bling because education is futile for them. But is there a quantitative model ? At what point do people give up on bling or education? An intertemporal model and change in intergenerational mobility can resolve this problem.
Basic question: Is it really wasteful to buy a watch? I start with the assumption that it isn't. In fact we all need it. For what gains is the question,
Literature Survey
Veblen
Theory is not different from intertemporal subsitution
Intertemporal substitution also helps us answer the effect of wealth - wealth differences would require status consumption to be different.
Effect of wealth is not considered often
To consider wealth one needs to see the combined effect of non-durable consumption and durable goods (which are fine in a developing economy)
Combined effects need requires two reference levels
Model
temporal hierarchy and variables
Dynamics
Cost Function
rho matters both way - subsistence varies and bliss varies - one could see the relative effect of the two
Implications of quality as excess non-durable consumption
P_nu is available at group level
Unavailable items lower Psi but may increase P_nu
No durable goods are part of needs
Life Cycle Effects are included
Segregation of needs/ substitution is not addressed in the direct utility method
Social Characteristics