Choosing to keep up with the Joneses and income inequality (Q607480)

Consider an economy of heterogeneous agents. If an agent's utility depends on the consumption of another agent, then the agent is said to be in a rat race. This paper studies the equilibrium of such an economy, with the novel feature that an agent may elect to drop out of the rat race. The paper proves the existence of equilibrium, together with a partial characterization and a useful numerical example. Average consumption and average leisure are inversely related.