Economics Experimental Lab
【Title】Curbing the Consumption of Positional Goods: Taxing vs. Nudging
It is already well-articulated that economic agents are concerned about their relative standing compared with relevant others in the society. In this regard, individuals may prefer to have not only high income or consumption, but also to have more than others, i.e., occupy a superior relative position in the society. Positional goods are of viable importance, as individuals compete and try to achieve a superior relative position in the society mainly through the consumption of positional goods and services.
Motivated by the growing body of economic literature on social networks, a nascent stream of theoretical and experimental research studies the positional concerns of individuals in social networks. The main point of this literature is that one’s social contacts constitute her reference group and individual outcomes are shaped by the overall pattern of connections in the society. More specifically, it is illustrated that individuals’ consumption of positional goods is determined by the Katz-Bonacich centrality of their position in the social network. Moreover, the overall network structure, especially the number of links, also affects consumption decisions and welfare.
The first aim of this paper is to study the impact of a nudge‒the announcement of the socially optimal consumption in combination with a moral message‒on positional concerns of individuals. We also strive to compare the efficacy the nudge with that of a tax imposed on the consumption of the positional goods.
The second aim of this paper is to explore whether nudging or taxing the individuals with the highest Katz-Bonacich centrality can be effective policy interventions.
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