Choosing the Joneses: Endogenous Goals and Reference Standards

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...

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Bibliographic Details
Published in:The Scandinavian journal of economics 2004-09, Vol.106 (3), p.417-435
Main Authors: Falk, Armin, Knell, Markus
Format: Article
Language:English
Subjects:
Attitude formation
College students
Comparative analysis
Consumption
D62
D63
Economic models
Economics
goals
H31
Happiness
High school students
High schools
Human behaviour
Logical givens
Modeling
Motivation
Reference groups
Reference standard
Research methods
Self-evaluation
Social comparison
Social psychology
Studies
Z13
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Summary: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 introduce 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 people thus tend to compare themselves to similar others. The results of a questionnaire study confirm the prediction of the model.
ISSN:0347-0520
1467-9442
1467-9442
DOI:10.1111/j.0347-0520.2004.00370.x