The “Thünen-Archiv” Get access The Quarterly Journal of Economics, Volume 19, Issue 1, November 1904, Pages 149–151, https://doi.org/10.2307/1884868 Published: 01 November 1904

This paper investigates whether individuals feel worse off when others around them earn more. In other words, do people care about relative position, and does “lagging behind the Joneses” diminish well-being? To answer this question, I match individual-level data containing various indicators of well-being to information about local average earnings. I find that, controlling for an individual's own income, higher earnings of neighbors are associated with lower levels of self-reported happiness. The data's panel nature and rich set of measures of well-being and behavior indicate that this association is not driven by selection or by changes in the way people define happiness. There is suggestive evidence that the negative effect of increases in neighbors' earnings on own well-being is most likely caused by interpersonal preferences, that is, people having utility functions that depend on relative consumption in addition to absolute consumption.

This paper examines whether terrorism is an effective tool for achieving political goals. By exploiting geographic variation in terror attacks in Israel from 1988 to 2006, we show that local terror attacks cause Israelis to be more willing to grant territorial concessions to the Palestinians. These effects are stronger for demographic groups that are traditionally right-wing in their political views. However, terror attacks beyond a certain threshold cause Israelis to adopt a less accommodating position. In addition, terror induces Israelis to vote increasingly for right-wing parties, as the right-wing parties move to the left in response to terror. Hence, terrorism appears to be an effective strategy in terms of shifting the entire political landscape to the left, although we do not assess whether it is more effective than non-violent means.

We study the price-setting problem of a firm in the presence of both observation and menu costs. The firm optimally decides when to “review” costly information on the adequacy of its price. Upon each review, the firm chooses whether to adjust its price, one or more times, before the next price review. Each price adjustment entails paying a menu cost. The firm's choices map into several statistics: the frequency of price reviews, the frequency of price adjustments, the size distribution of price changes, and the hazard rate of price adjustments. The simultaneous presence of observation and menu costs produces complementarities that change the predictions of simpler models featuring one cost only. For instance, infrequent observations may reflect a high menu cost rather than high observation costs: in spite of these complementarities, we show that the ratio of the two costs is identified by several statistics on price observations and adjustments.

I. Introduction, 240. — II. Price variations models of oligopoly, 241. — III. An experimental oligopoly market, 242. — IV. Hypotheses, 248. — V. Procedure, 249. — VI. Results, 251. — VII. Discussion, 257. — VIII. Summary and conclusions, 259.