Incorporating Concern for Relative Wealth Into Economic Models

A standard, often implicit, assumption in economics is that people only accumulate wealth to fund consumption by themselves and their families. In this article, we will argue that, in many circumstances, people have other motivations for wealth acquisition. In particular, we will argue that people acquire wealth in order to be wealthier than other people. Moreover, while this desire to be wealthier than other people appears to capture a concern for relative status, it can be justified on narrow economic grounds.