Comparison-concave utility and following behaviour in social and economic settings

This paper describes a theory of rational emulation and deviance. It assumes that individuals care about relative position (or 'status'), and constructs a model of decisionmaking in social and economic settings. The analysis shows why individuals who want to be different from others will, paradoxically, find it rational to imitate other people. The paper also provides a choice-theoretic foundation for a number of ideas in the social psychology and economics literatures. The central point of the paper is that concern about relative position or rank is, by itself, insufficient to bring about emulation. The reaction of an individual to others' behaviour depends crucially on the curvature of the comparison term in their utility function: individuals with comparison-concave utility follow others while those with comparison-convex utility act deviantly. (C) 1998 Elsevier Science S.A. All rights reserved.