Conspicuous Consumption and Game Theory
Overview
In this paper we intend to draw a comparison between Thorstein Veblen's theory of Conspicuous Consumption and Arms Races, or the Hawk-Dove game. We believe that Conspicuous consumption can be explained by using these strategic models, and will conduct a survey type experiment to prove this. The paper will be divided up into three sections. The first section will outline Veblen's theory and discuss the different types of conspicuous consumption. The second section will explain the idea behind Arms Races or the Hawk-Dove Game and outline some of the existing literature on this. The final section will consist of the application of these Game Theory priciples to the idea of Conspicuous Consumption.
Conspicuous Consumption
Conspicuous Consumption is the act of consuming expensive, showy goods, often called "luxury" goods. These goods often are of the same quality as lower priced goods, but offer a societal benefit to the consumer.
Thorstein Veblen
Invidious Comparison
Invidious Comparison - When a member of a higher class practices conspicuous consumption in an attempt to separate themselves from the lower classes, in turn creating envy of the consumer.
Pecuniary Emulation
Pecuniary Emulation - When a member of a lower class consumes conspicuously in an attempt to appear a member of a higher class.
Arms Race
Application of Game Theory to Conspicuous Consumption
| Hawk | Dove | |
| Hawk | 3,3 | 5,0> |
| Dove | 0,5 | 1,1> |
