Choosing the Joneses: Endogenous Goals and Reference Standards

By Armin Falk, M. Knell. Social Science Research Network, 2004

273 citations recorded by the source corpus.

A growing economic literature stresses the importance of relative comparisons, e.g., for savings and consumption or happiness. In this literature it is usually assumed that reference standards against which people compare themselves are exogenously given. In contrast, findings from social psychology suggest that people play an active role in determining their reference standards. We present a social comparison model where people choose their reference standards to serve motives of self-improvement and self-enhancement. The model predicts that reference standards increase in individuals’ abilities and that people therefore tend to compare themselves to similar others. The results of a questionnaire study confirm the model’s prediction.

Subfields: Economics and Econometrics, General Decision Sciences, Social Psychology

View Paper: https://www.semanticscholar.org/paper/a459b7749502074c652251d887b9f93542b0446e

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Citations in the corpus

Status Concerns as a Motive for Crime? (2015, background): “7 status concerns, we do not consider the possibility that reference groups may be endogenous.6 We follow Card et al. (2012), Falk and Knell (2004), and Konrad and Lommerud (1993), among others, when we specify S ≡ c− c̄.”
Income and happiness: Evidence, explanations and economic implications (2006, background): “Falk and Knell (2004) ask what happens if individuals can partly choose their reference group.”
Direct evidence on income comparisons and their welfare effects (2009, unknown): “Some studies suggest that optimistic people only compare downward, whereas pessimistic people compare with more successful ones (Lyubomirski et Ross, 1997).”
Education as a Positional Good: A Life Satisfaction Approach (2011, background): “evidence suggests that, at least for income, comparisons are mostly upward and individuals tend to compare to similar others and to those with whom they usually interact ( Falk and Knell 2004; Clark and Senik 2009).”
Who Compares to Whom? The Anatomy of Income Comparisons in Europe (2010, unknown): “everyone compares only to people who are poorer than them, perhaps for self-enhancement reasons (Falk and Knell, 2004).”
Self-Regulation Through Goal Setting (2011, unknown): “The idea that goals serve as reference points, which are in part actively chosen by the individual, can also be found in Falk and Knell (2004) (see below).”
Relative Income, Happiness and Utility: An Explanation for the Easterlin Paradox and Other Puzzles (2008, unknown): “Falk and Knell (2004) ask what happens if individuals can partly choose their reference groups.17 To obtain interior solutions for this choice, the psychological literature has distinguished between ‘self-enhancement’ and ‘self improvement’ motives.”
Community, Comparisons and Subjective Well-being in a Divided Society (2007, background): “Much of the economic literature on the importance of relative concepts treats people’s reference groups as given, yet they could be endogenously chosen by individuals in the pursuit of certain goals (Falk and Knell). Nesse (2004) similarly rejects the notion that our ‘salient others’ are shaped by o”