Abstract
Experimental evidence suggests that individual consumption has not only personal value but also enters the social part of the utility. Existing models of social preferences make ad hoc parametric assumptions about the nature of this duality. This creates a problem of experimental identification of preferences since without such assumptions it is impossible to distinguish whether consumption or social concerns are driving the behavior. Given observed choice, the Axiomatic model of preferences in this article makes it possible to unambiguously determine personal and social utility without any assumptions about their relationship. The unique separation can be achieved only if the individual choices in different subgroups of other people are available. Preferences over consumption and status are used as an example to demonstrate how the utility is constructed. The model shows what kind of information about choice is needed to empirically determine the nature of social preferences without making restrictive assumptions. This can help to estimate whether personal consumption or social value is more important in economic decisions.
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Acknowledgments
The author would like to thank Aldo Rustichini, Marcel K. Richter, and Michele Boldrin for innumerable conversations and guidance that shaped his comprehension of the subject and resulted in this article. The author is grateful to Andrew Cassey, Joshua Miller, Philipp Reiss, Arno Riedl, and the participants of the Neuroeconomics workshop at the University of Minnesota for insightful comments. All mistakes are his.
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Open Access This is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License (https://creativecommons.org/licenses/by-nc/2.0), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.
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Vostroknutov, A. Preferences over consumption and status. Theory Decis 74, 509–537 (2013). https://doi.org/10.1007/s11238-011-9291-2
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DOI: https://doi.org/10.1007/s11238-011-9291-2