Do social status seeking behaviors worsen the tragedy of the commons?

Abstract

The present paper considers the exploitation of a common- property, non-renewable resource, by individuals concerned with their social status. Assuming that the social status is reflected by the individuals'relative consumptions, we formalize this motivation by means of a utility function, depending on the individual’s actual consumption and on the consumption level he aspires, the latter being related to the consumptions in his reference group. We compare the benchmark cooperative solution with a noncooperative Markov- perfect Nash equilibrium. We confirm, under more general conditions than in the existing literature, that the individuals'sconcern for social status exacerbates the tragedy of the commons. We finally discuss the policy implications and provide a taxation scheme capable of implementing the cooperative solution as a noncooperative Markov-perfect Nash equilibrium.