FEEM working papers "Note di lavoro" series
2015 .034

Regulating the Environmental Consequences of Preferences for Social Status within an Evolutionary Framework


Authors: Eftichios S. Sartzetakis, Anastasios Xepapadeas, Athanasios Yannacopoulos
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro
Keywords: Status-seaking, Replicator Dynamics, Information Provision, Environmental Taxation
JEL n.: Q53, Q58, D62, D82

Abstract

Taking as given that we are consuming too much and that overconsumption leads to environmental degradation, the present paper examines the regulator's choices between informative advertisement and consumption taxation. We model overconsumption by considering individuals that care about social status apart from the intrinsic utility, derived from direct consumption. We assume that there also exist individuals that care only about their own private consumption and we examine the evolution of preferences through time by allowing individuals to alter their behavior as a result of a learning process, akin to a replicator dynamics type. We consider the regulator's choice of consumption taxation and informative advertisement both in an arbitrary and an optimal control context. In the arbitrary overconsumption control context we find that the regulator could decrease, or even eliminate, the share of status seekers in the population. In the context of optimal overconsumption control, we show that the highest welfare is attained when status seekers are completely eliminated, while the lowest in the case that the entire population consists of status seekers.

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Sartzetakis, E. S., A. Xepapadeas, A. Yannacopoulos, (2015), 'Regulating the Environmental Consequences of Preferences for Social Status within an Evolutionary Framework', Nota di Lavoro 34.2015, Milan, Italy: Fondazione Eni Enrico Mattei

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