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Status and welfare under monopolistic competition

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Abstract

This article departs from the traditional welfare analysis of social status seeking by incorporating scale economies, product differentiation, and monopolistic competition into a model. I argue that social status seeking could be welfare improving rather than the usual conclusion that social status seeking is welfare-reducing, under some assumptions that are not particularly strong. Market distortions of the quantity–variety and consumption–leisure trade-off may be corrected by social status seeking. Since modern societies are arguably closer to monopolistic competition than perfect competition, we may also need to rethink the long-held belief that the welfare effects caused by social status seeking are usually negative.

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  1. Department of Economics, The Chinese University of Hong Kong, Shatin, Hong Kong

    Wai Chiu Woo

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  1. Wai Chiu Woo
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Correspondence to Wai Chiu Woo.

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Woo, W.C. Status and welfare under monopolistic competition. Soc Choice Welf 36, 227–239 (2011). https://doi.org/10.1007/s00355-010-0472-7

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  • DOI: https://doi.org/10.1007/s00355-010-0472-7

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