Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/174943 
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper No. 6820
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper investigates how the presence of social capital affects the externality arising from status-seeking preference as a parable for inefficient antagonistic behavior. It is assumed that the stock of social capital is accumulating through joint social interaction between rational individuals who are forward looking. Using a differential game, we show that although the presence of social capital mitigates the tendency of overconsumption over time, social capital ends up declining to zero. It is also shown that the benefits from social capital enhance the motivation of individuals to accumulate social capital thereby leading to deter overaccumulation and thus possibly improving social welfare.
Subjects: 
social capital
status externality
Markov perfect
equilibrium
differential game
JEL: 
O40
Q33
Document Type: 
Working Paper
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