Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/91277
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Title: Positional competition : a theory of the Great Gatsby curve and the Easterlin paradox
Authors: Peng, B 
Issue Date: Jun-2021
Source: Journal of economic behavior & organization, June 2021, v. 186, p. 562-575
Abstract: This paper provides a novel theory that simultaneously explains the Great Gatsby curve and the Easterlin paradox, demonstrating that these two phenomena could be driven by the same mechanism. I model positional competition, in which productive opportunities are allocated according to relative performance, as a Nash equilibrium outcome of agents reacting optimally to a distribution of productive opportunities. Positional competition is not a zero-sum game and its intensity is endogenously determined. The distribution of income and intergenerational mobility are also endogenously determined, with income following a power law distribution. As productivities become more dispersed, optimizing agents respond by competing more intensely with each other. This endogenous intensification lies at the heart of my explanation for both the Great Gatsby curve and the Easterlin paradox.
Keywords: Equality of opportunities
Happiness
Inequality
Mobility
Power law distributions
Superstar effect
Publisher: Elsevier BV
Journal: Journal of economic behavior & organization 
ISSN: 0167-2681
DOI: 10.1016/j.jebo.2021.04.003
Rights: © 2021 The Author. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/ )
The following publication Peng, B. (2021). Positional competition: A theory of the Great Gatsby curve and the Easterlin paradox. Journal of Economic Behavior & Organization, 186, 562-575 is available at https://doi.org/10.1016/j.jebo.2021.04.003
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