Econometrica Vol. 60 No. 4 1992
Status, the Distribution of Wealth, Private and Social Attitudes to Risk
Abstract
This paper supposes an individual cares about his/her own wealth not only directly but also via the relative standing that this wealth induces. The implications for risk-taking are investigated in particular. Such a model provides a natural explanation of the "concave-convex-concave" utility described by M. Friedman and L. Savage (1948). However, there are a number of key differences between the present model and any model based on own wealth alone. For example, an equilibrium wealth distribution here may have a middle class. Further, the status interaction involves an externality and an equilibrium wealth distribution may be Pareto inefficient.
- DOI
- 10.2307/2951568
- Volume
- 60
- Issue
- 4
- Pages
- 837
- Sources
- bibtex:phds-export.bib crossref openalex