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On positional consumption and technological innovation: an agent-based model

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Abstract

Positional behaviour is arguably a source of social externalities. Remedies for this market failure are defended by some authors and rejected by others. One of the issues discussed is the role that the competition for positional goods may have in generating technological innovation. This article aims to contribute to the understanding of the dynamics of this process through the use of an agent-based model. Simulations show a plausible dynamics of the process of technological innovation as generated by consumption of positional nature. An interpretation of the results in the scope of the policy discussion in question is provided. The influence of key factors such as income inequality, the materialization of the Hirsch conjecture, and characteristics of the network of relative preferences, is analised. We also frame the potential interest of positional consumption and this model in particular in the context of the ongoing discussion among evolutionary economists on the behaviour of demand.

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Notes

  1. Literature on positional consumption commonly uses the term to refer simply to consumption where satisfaction is defined by social scarcity. Our work also adopts the nomenclature in this stricter sense.

  2. Authors like Layard (1980), Ng (1987) and others suggested income taxation to bring the balance of private and public expenditure to a level consistent with welfare objectives. Before Hirsch, Duesenberry (1949, pp 92–104) suggested the need for intervention in an economic system with interdependent consumer preferences, particularly through progressive income taxation.

  3. In fact, this type of non-linearity was possibly responsible for the neglect of economics research on the theory of consumer relative preferences. 1949) proposed a credited theory of consumer behaviour which took into account relative preferences. However, it soon became marginalized from mainstream analyses. Possibly, the mathematization of the economics discipline at the time rendered the consideration of relative preferences as undesirable from the point of view of the tractability of problems (Mason 2000).

  4. Versions of the good under study are further simply designated as goods.

  5. k p = 20 in all simulations below.

  6. For the purposes of this work, a ranking characterizes the hierarchical order of subjects before a given attribute. The ranking is a sequence of integers between one (1) and the number of subjects characterized by the ranking (C). Rankings are attributed by decreasing order of the attribute values of subjects. In this case, the subjects are the consumers and the attribute is their income.

  7. A k of 2 is equivalent to a Gini index of 0.251 or a Hoover index of 0.219.

  8. In terms of formal model implementation, this was done simply by doubling the number of iterations and reducing to half the average income \(\overline {W}\) in each period.

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Acknowledgments

This work has benefited from partial financial support from the Fundação para a Ciência e a Tecnologia-FCT, under the 13 Multi-annual Funding Project of UECE, ISEG, Technical University of Lisbon.

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  1. Research Unit on Complexity and Economics, ISEG, Technical University of Lisbon, Lisbon, Portugal

    João P. R. Bernardino & Tanya Araújo

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  1. João P. R. Bernardino
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  2. Tanya Araújo
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Correspondence to João P. R. Bernardino.

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Bernardino, J.P.R., Araújo, T. On positional consumption and technological innovation: an agent-based model. J Evol Econ 23, 1047–1071 (2013). https://doi.org/10.1007/s00191-013-0317-5

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