Choosing the Joneses: Endogenous Goals and Reference Standards

Armin Falk and Markus Knell

No 1152, IZA Discussion Papers from Institute of Labor Economics (IZA)

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 (search for similar items in EconPapers)
JEL-codes: D62 D63 H31 Z13 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2004-05
New Economics Papers: this item is included in nep-cbe and nep-evo
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Citations: View citations in EconPapers (180)

Published - published in: Scandinavian Journal of Economics, 2004, 106 (3), 417-435

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Journal Article: Choosing the Joneses: Endogenous Goals and Reference Standards (2004)
Working Paper: Choosing the Joneses: Endogenous Goals and Reference Standards (2004)
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