GCOE Discussion Paper Series
Global COE Program

Human Behavior and Socioeconomic Dynamics
Discussion Paper No.99

Measurement of Social Preference
from Utility-Based Choice Experiments

Katsunori Yamada, Masayuki Sato and Yasuhiro Nakamoto

November 2009GCOE Secretariat
Graduate School of Economics

OSAKA UNIVERSITY

1-7 Machikaneyama, Toyonaka, Osaka, 560-0043, Japan

Measurement of Social Preference from Utility-Based
Choice Experiments∗
Katsunori Yamada †Masayuki Sato ‡Yasuhiro Nakamoto §Abstract
Ever since the classical works of Smith and Veblen, economists have recognizedthat individuals care about their relative positions and status in addition to theirown consumption. This paper addresses a new framework of choice experiments inorder to specify the shape of utility function with preference externalities. Theoretical studies on social preference, which are conducted without estimating or calibrating important parameters of social preference and put forward various propositionsin accordance with the parameters assumed, can refer to the parameters estimatedin this paper. Our ﬁndings complement those of happiness studies which support
the view of social preference. We show that preference externality is, on average,
characterized by jealousy among Japanese respondents, and also that heterogeneity
in social preference parameters is driven by diﬀerences in income levels, age, andgender.

Keywords: Social preference; Relative utility; Stated preferences; Choice experiment

JEL classiﬁcations: C25; D03; D62∗

We would like to thank helpful comments from Hiroki Arato, Takahiro Ito, Fumio Ohtake, andseminar participants at Kyoto university. Of course, any remaining errors are authors’. Nakamoto and
Yamada are grateful for the research grant provided by the GCOE program entitled “Human Behavior
and Socioeconomic Dynamics” of Osaka University.
†
Corresponding author:
Institute of Social and Economic Research, Osaka University,
kyamada@econ.osaka-u.ac.jp, Mihogaoka 6-1, Ibaraki 567-0047, Japan.
‡
Field Science Education and Research Center, Kyoto University, Yoshida Hon-machi, Sakyo-ku,
Kyoto, 606-8501, Japan.
§
Faculty of Economics, Kyushu Sangyo University, 2-3-1 Matsukadai, Higashi–ku, Fukuoka, 813-8503,
Japan.

1

1

Introduction

In the literature of behavioral economics, important parameters have been estimated via
experiments, and policy implications derived from theoretical studies addressing theseparameters have shown a richness and more practical adaptation. Thus far, considerable progress has been made in ﬁelds such as environmental economics, health economics,
and transportation economics. In this paper, we apply a choice experiment method in asurvey experiment to the economics of social preference. Although the social preference
eﬀect has been recognized since the classical works of Adam Smith and Thorstein Veblen
and despite the fact that there are a number of happiness studies in the literature that
support the view of social preference, there is as yet no direct information on the shape ofutility function with social preference. This paper bridges the gap between the theoretical and empirical studies on social preference by estimating the signs and magnitudes ofpreference parameters using conditional and mixed logit models. The techniques of choice
experiments are, as far as we are aware, new to the literature of social preference. Theoretical studies with preference externality have provided diﬀerent types of implications inaccordance with diﬀerences in assumed parameters. However, we believe that such studies will be able to provide more practical policy implications in the future by addressing
estimated parameters in choice experiments of the kind we provide in this paper.
Regarding the existence of social preferences, many studies on happiness regressions
support the view in terms of jealousy eﬀects. These studies include Clark and Oswald[1996], Alesina, Di Tella, and MacCulloch [2004], Luttmer [2005], Ferrer-i Carbonell [2005],
and Clark, Kristensen, and Westergard-Nielsen [2009b].1 On the other hand, some experimental studies support the view of social preference in the form of egalitarianism
1
Senik [2004] showed that her proxies of reference wage aﬀect happiness positively in a Russian data
set. She argued this happened because the reference wage measures worked as signal devices rather thansocial comparison ones. In another study of happiness regressions that provided “admiration” results,
Clark, Kristensen, and Westergard-Nielsen [2009a] argued that a social preference as a form of admiration
resulted since they focused on comparison among neighbors, in which case reference income served as aproxy of social capital. See Frey and Stutzer [2001] and Frey and Stutzer [2002] for reviews of happinessstudies in the literature. Also see Clark, Frijters, and Shields [2008] for an excellent review of happinessstudies on social preference.

2

(Fehr, Bernhard, and Rockenbach [2008]; Bartling, Fehr, Marechal, and Schunk [2009]).2
Since it is possible that with egalitarianism people favor improvements in the economic
situation of others, egalitarianism can be related to “admiration”. Moreover, recent
developments in neuroscience have clariﬁed the brain mechanism of social preferences(Fliessbach, Weber, Trautner, Dohmen, Sunde, Elger, and Falk [2007]; Fehr and Camerer[2007]). Hence, in general, evidence from many research ﬁelds supports the notion of social preferences. However, as previous studies have provided mixed results about the signand magnitude of social preference eﬀects, here we further investigate the issue using thestrategy of choice experiments.
In a policy context of theoretical economics analyses, the existence of social preference has consequences on optimal tax decisions Oswald [1983]. Since social preferencefunctions as an externality in competitive markets, welfare maximization in a society
can be attained only with the knowledge of the direction and intensity of the eﬀects(Corneo and Jeanne [1997]; Corneo and Jeanne [2001]). Also, it has been consideredthat social preference aﬀects asset pricings in macro economies (Abel [1990]; Gali [1994];
Bakshi and Chen [1996]). However, without knowledge of the true parameters, we cannot determine whether the eﬀects of social preference are large enough to have consequential eﬀects on macroeconomic asset pricings. By introducing the choice experiments
framework to the literature of social preference, we can obtain evidence which is directly
applicable to theoretical studies of social preference.3 Moreover, by applying our strat2
Interestingly, experiments on non-human animals, namely, chimpanzees, showed that they are not endowed with social preferences. See, for example, Silk and et al. [2005], Jensen, Hare, Call, and Tomasello[2006], and Jensen and Tomasello [2007].
3
The reason why the literature of happiness studies cannot provide direct information on utility
function is that dependent variables for the regressions of subjective well-being (SWB) are constructedfrom surveys which typically ask respondents to select levels of job or life satisfaction from a list of
numbers. The selected numbers are then considered to be proxies of the levels of “utility”. However, there
has been some debate about interpretations of the nature of SWB, since researchers have not been surewhether it represents cardinal or ordinal utility (van Praag [1991]; Ferrer-i Carbonell and Frijters [2004]).
Also, SWB measures of respondents will be inﬂuenced by many aspects of their life including individual
characteristics and mood on the day of the survey Kahneman, Krueger, Schkade, Schwarz, and Stone[2006]. On the other hand, utility in a technical sense is considered to be dependent just upon consumption(and social status). This ambiguity about the coverage of SWB measures means that researchers cannot
specify the shape of “utility function” from the SWB data, which encompasses measurement errors ofutility.

3

egy of choice experiments, we can overcome a problematic issue common to happinessstudies of social preference: construction of the proxies of social preference in happiness
regressions is diﬃcult because people’s determinations of reference groups are endogenous(de la Garza, Mastrobuoni, Sannabe, and Yamada [2009]). With our choice experiments,
the endogeneity problem can be mitigated since the socio-economic situations and reference points are exogenously given.
In this paper, similar to Viscusi, Huber, and Bell [2008], we estimate important parameters associated with consumer preferences by using a random utility model, and conditional ﬁxed-eﬀects logit and mixed logit models. The data for our study was collectedusing a survey methodology rather than using an experimental structure.4 The cohort
proﬁle of our study sample mirrored the Japanese census statistics, and for this sample
we estimated the parameters in utility function which regulate preference externalities. A
major diﬀerence between Viscusi et al. [2008] and our paper is that Viscusi et al. [2008]
used a structural setting to infer parameters from estimates in conditional logit models
while we use a reduced-form formulation and impose normalizing assumptions on scaleparameters to specify preference parameters from our estimates. In this sense, our method
may be more akin to that of Ida and Goto [2009] in which time and risk preference parameters are estimated using a reduced-form setting. Whereas Ida and Goto [2009] presume
that the scale parameters are equal to one, in this paper, we make preferred normalizing
assumptions on them and specify the shape of utility function with social preference.5
The major ﬁndings presented in this paper can be summarized as follows. First, fromthe conditional logit model, preference externality is characterized by jealousy rather than
4

Experimental studies on game theory and social preference include Charness and Rabin [2002].
See Train [2003] for the interpretations of scale parameters in conditional logit models. We argue that
our strategy is more appropriate than that in Ida and Goto [2009] where the full sample is divided into subgroups and preference parameters are estimated separately in each sub-group. With their methodology,
if scale parameters, which are unknown to researchers, are diﬀerent across sub-groups, we cannot directlycompare estimates coming from the diﬀerent sub-groups. With our data set, although not shown inthis paper, it was conﬁrmed, with heteroscedastic logit models, that there are signiﬁcant diﬀerencesin the scale parameters across sub-groups of diﬀerent individual characteristics. The structural setting
in Viscusi et al. [2008] is much superior regarding this point since normalizing assumptions on scaleparameters are not required in their framework.
5

4

admiration among Japanese respondents. Second, we obtain that the welfare loss in acompetitive symmetric equilibrium caused by the preference externality is around 2.6 percent, compared to the social optimum. We argue that the intensity of market ineﬃciency
resulting from social preference is comparable to that resulting from inﬂation and pricerigidity. Thirdly, we consider the heterogeneity of preference parameters. Using a mixed
logit model, we obtain that 64.4 percent of our study sample have negative preference
externality (jealousy), and that the remaining 35.6 percent have positive preference externality (admiration). We also consider preference parameter heterogeneity caused bydemographic diﬀerences. We show that heterogeneity in social preference parameters isdriven by diﬀerences in income levels, age, and gender.
The rest of the paper is organized as follows. Section 2 provides a description of ourdata set and introduces the choice task in which respondents make socio-economic situation choices. We also provide evidence of the existence of social preference among respondents from happiness regressions. Section 3 describes the features of the random utility
model and provides baseline preference parameters from the conditional logit model. In
section 4, we consider the heterogeneity of preference parameters across individuals byusing the mixed logit model, and by using the conditional logit model with dummy interactions. Section 5 provides some concluding remarks and the Appendices present theresults of rationality tests and scope tests.

2

Data

2.1

Structure of dataset

Our data set is taken from an original Web-based survey conducted in March 2009. A
Japanese consumer monitoring company, whose total number of registered subjects isaround 990,000, conducted the survey. Japanese subjects aged between 18 and 69 werechosen at random from the population such that the cohort proﬁle of our study sample

5

mirrored the Japanese census statistics. The company distributed the survey to 2,859
monitors and 1,043 of them completed the survey. The average investigation time toﬁnish the survey was 18 minutes 30 seconds. Each respondent who completed the survey
was paid about 800 yen (about 8 US dollars). Because each respondent was asked torespond to eight situation choice tasks repeatedly, the number of observations from ourchoice experiment is 8,344 at maximum. We removed observations if they did not provide
suﬃcient information.6
Descriptive statistics of the entire sample are shown in Table 1. Women account foraround 48 percent of the entire sample. Mean age of the respondents is 44.9 years and66 percent of the entire sample is married. Regarding educational attainment, 3 percentof the sample completed middle school only, 33 percent completed high school, and 39
percent pursued more advanced studies. The remaining 25 percent of the sample holds
other degrees including those from technical and 2-year college programs. We do not see
a big demographic diﬀerence between men and women except in the case of college andpost doctoral attainments.

2.2

Choice tasks

In the survey, each subject considered socio-economic situation choice tasks. Before therespondents completed the repeated choice tasks, they answered two questions related tosocial comparison. The ﬁrst question concerned self-assessment on attitude toward social
comparison in the form of pecuniary rat races. The question was phrased as “Are you
conscious about the levels of others’ consumption and savings?”. The respondent was
asked to mark down the level of jealousy from 5 response options, where 1 corresponded
to “not jealous at all” and 5 denoted “very jealous”. The second question concerned
the respondent’s deﬁnition of their reference group. They were asked to choose one
category, from those applicable to them, as their reference group among (i) relatives,
6

Hence, the eﬀective response rate was 30.0 percent for our study. The average response rate forsurveys of this kind conducted by the company is reportedly around 35 percent.

6

(ii) neighbors, (iii) friends, (iv) friends from school, (v) colleagues, and (vi) others. Outof the entire sample, only 43 respondents (4.1 percent) stated that they do not have areference group and do not compare themselves with others. After answering these twoquestions, the respondents were considered ready for the following situation choice tasksof social comparison.
Our research strategy was to elicit respondents’ preference toward social comparison
through choice experiments (stated preference method). Among some of the previous
theoretical studies on preference externalities, such as Futagami and Shibata [1998], it
was assumed that people care about relative amount of wealth, that is, a stock variable.
However, in our survey, in order to avoid the complexities involved in inter-temporal economic decision making, we concentrate on the intra-temporal aspect of social comparison.
That is, we consider the allocation of consumption and saving out of certain amount ofincome for a given period, but do not consider ﬁnancial or real stock as a device of social
comparison.7 Note that we did not specify a time span because doing so may remove
reality from the choice task for some subjects. Instead, given the levels of attributes, therespondents could adjust the time span for consumption and saving in accordance with
their real lives. One more crucial matter in the choice experiment is how to deﬁne anappropriate reference person in the socio-economic choice experiment; the possibilities,
including the average person in society, colleagues, persons deﬁned by the Leyden schooldeﬁnition, family, neighbors, and so forth, are endless. Nevertheless, our preferred speciﬁcation here is that the reference point is given by “some representative person in society”,
a deﬁnition which is akin to that used in previous theoretical studies. The situation choicetasks employed in this study are as follows.
Question: Imagine that for a given period of time you can make consumption and savings of certain amounts. In the following ﬁgures, pairs of yourconsumption and saving as well as those of “some representative person in so7

Using the perpetual inventory method, we may be able to infer a steady state level of wealth in a
dynamic setting from our intra-temporal decision problem.

7

ciety” are presented. Imagine that each set on your consumption-saving proﬁleand the other’s consumption-saving proﬁle regulates society’s socio-economic
situations. Which of situation 1 and 2 do you prefer?
Situation 1

Situation 2

Other's consumption
3 million yen
Other's saving
3 million yen

Other's consumption
3 million yen
Other's saving
2 million yen

Your consumption
1 million yen
Your saving
4 million yen

Your consumption
3 million yen
Your saving
1 million yen

Ans. (1) Situaion 1 (2) Situation 2 (3) don't know, cannot choose

Hence, in this choice experiment we assume that there are four attributes for an alternative. Respondents receive information on these four dimensions of the choices: own
consumption, own saving, other’s consumption, and other’s saving. Respondents repeat
eight situation choices, which are deﬁned along these four dimensions. So, in the caseof the example given above, if a subject is concerned only with his own consumptionsaving levels and if he is inclined to saving, he will choose Situation 1. However, if thesubject feels jealous of the other’s consumption and/or saving, he may choose Situation
2 at the expense of his own economic activity in order to turn away from the other’shigher level of saving in Situation 1. If he has an altruistic preference (admiration), hemay choose Situation 1 even when he wants to make consumption more in Situation 2.
After some pretests, we determined the levels of these attributes and the survey included
the following situation variations – JPY 1 million, JPY 2 million, JPY 3 million, or JPY
4 million for each dimension. The choice sets were selected via orthogonal design and16 situation choices out of a total of 256 potential variations were used in the survey.8
8

We used SPSS ver 15.0 for orthogonal design and STATA ver 10.1 for the rest of the empiricalanalyses, together with Hole’s STATA modules for mixed logit model estimation (Hole [2007]).

8

Similarly to Viscusi et al. [2008], the choice design was paired so as to balance the utilityof each alternative (Huber and Zwerina [1996]). Finally, we avoided dominant options oreasy choices. With all these devices, we could eﬃciently obtain parameter estimates. We
removed observations in which the no-choice option (3) was selected in the choice tasks
from our study sample, leaving us with 6,872 observations out of the total 8,344 (82.3
percent).

2.3

Testing Social Preference with Happiness Regressions

While our main focus is on choice experiments for measuring the shape of utility function,
we can investigate if our study sample has social preference in general by performing
happiness regressions. The survey asked each respondent to provide information on his
own level of pecuniary satisfaction in life by selecting from 5 response options, where 1
corresponded to “least satisﬁed” and 5 denoted “most satisﬁed”. The survey also asked
that, from a list of 15 categories, workers mark down their own level of wage and subjective
perception of reference wage, where the reference group was deﬁned in the Leyden school
fashion.9 In the analysis that follows, we measure individual income as the mid-point ineach of the 13 intermediate categories, and use ad hoc values close to the minimum andmaximum wage levels for the two extremes. Thus, respondents who reported categories
1, 2, . . . , 15 as their annual income level, were assigned an annual income of 0; 0.5; .
. . ; 22.5 million yen, respectively. We also collected information about ﬁnancial assets
using 12 response options. The assigned values for ﬁnancial assets in the regressions are
determined as explained in Table 2. Alternative choices do not alter the main results.10
Figure 1 shows the averages of reported happiness and reference income category acrossown income categories. As can be seen, those with a higher annual income tend to report ahigher level of happiness, while they expect a higher level of reference income. Therefore,
9

The question concerning the reference wage was phrased as “What do you think the average annual
total wage is of those who are your age, gender, and educational attainment?”
10
Table 2 shows the distribution of income and ﬁnancial assets among subjects. We provided Category
16 for annual income and Category 13 for ﬁnancial assets for those who do not want to provide suchinformation.

9

it is plausible that richer people feel happier (Alesina et al. [2004]). In addition, richer
people will expect a higher reference income because the reference group in the survey isdeﬁned as a group with similar individual characteristics, which covers income level.
Since less satisﬁed people may tend to report a higher level of reference wage, there
might be endogeneity between pecuniary satisfaction in life and the level of reported reference wage. In order to control for this potential endogeneity, we use the information on
pecuniary jealousy which is described in section 3. In this paper, we take this jealousy
measure to reﬂect pessimism among subjects, which can be used to control the bias for
pessimistic people (de la Garza et al. [2009]). Figure 2 illustrates the averages of jealousy
and reference income category across the level of satisfaction. As shown, those with ahigher level of satisfaction tend to report a lower level of pecuniary jealousy. On theother hand, they also report a higher level of reference income. We need to move to
multivariate analysis in order to see how the proxy of reference income — the measure ofsocial comparison — aﬀects satisfaction. The data set also allows us to control for individual demographic characteristics, which include gender, region, occupation, educational
attainment, number of children, and marital status.11
Table 3 shows the results of baseline regressions where individual demographic characteristics are not controlled. In the ﬁrst column, we see that log of own income aﬀects
pecuniary satisfaction positively and signiﬁcantly. The sign of log of reference income,however, is negative, which means that people tend to have not altruism but rivalry, although this does not reach signiﬁcance. In the second column where we add ﬁnancial
assets into the set of independent variables, the eﬀect of social comparison becomes signiﬁcant at the 10 percent level. When we add our measure of jealousy in column (4), we
ﬁnd that jealousy aﬀects satisfaction negatively.12 In column (6) where we add all thebaseline regressors, we ﬁnd that all of them are estimated correctly and are signiﬁcant
except for own income. In Table 4, we investigate the eﬀects of introducing other indi11

In the happiness regressions presented below, from the total of 1,043 observations, 177 were lost due
to insuﬃcient information on ﬁnancial assets or annual income level, leaving us with 843.
12
The eﬀect is found to be robust across speciﬁcations.

10

vidual demographic characteristics as regressors so as to determine whether the results inTable 3 are robust. The results show that, although in some speciﬁcations signiﬁcance is
not reached, our study sample has social preference as a form of rivalry, given that thereference income terms aﬀect satisfaction negatively.13 With this observation, we expectthat in the following choice experiments we will obtain negative externalities in utility
function.

3

Basic results from a random utility model

3.1

Random utility model

Here we describe our theoretical foundation of the concept of conjoint analysis. Individuals derive utility from their own consumption of a homogenous good c and own savings. In addition, they may be aﬀected by the levels of consumption C and saving S of
their representative person in society. Since each individual cannot choose the levelsof consumption and saving made by the representative person, the other’s consumption
and saving are considered as regulating consumption externality and saving externality,
respectively. In this case, the utility function is generally given by

U = U (c, s, C, S),(1)

where U represents the utility function. From textbook assumptions, we suppose that
subjects value attributes c and s positively. On the other hand, the representative person’s
consumption and saving can be valued positively or negatively. Hence, an increase in thelevel of consumption/saving by the representative person in society may raise or lower thelevel of the other’s welfare. Following the literature, a negative externality is characterized
as jealousy, while a positive one is characterized as admiration. We address the following

13

We would attribute non-signiﬁcance in our regressions to the small number of samples.

11

utility function in which each component is described by an exponential form as

U = cα sβ C χ S ψ ,(2)where α, β, χ and ψ are parameters.14 We presume that α and β are positive. We do
not impose restrictions on χ and ψ a priori, because they are regulated by social norm. If
their signs are positive, then the social norm of social comparison will be of admiration;
if they are negative, society has a social norm of jealousy.
To analyze the conjoint decisions, we use a random utility model framework. Let idenote alternative i, and n denote respondent n. Then, in order to bring the theoreticalframework to the data, we take the logarithms of both sides in Equation 2 to obtainln Uni = α ln cni + β ln sni + χ ln Cni + ψ ln Sni .

(3)

The above expression can be used for estimating parameters via a random utility model
together with an error term ²n . The probability pni that respondent n prefers alternative
i to alternative j is given by(pni = P rob α ln cni + β ln sni + χ ln Cni + ψ ln Sni + ²ni)> α ln cnj + β ln snj + χ ln Cnj + ψ ln Snj + ²nj , for all j 6= i.

(4)When ²n is distributed following independent and identical distribution of extreme value
type 1 (IIDEV1), we obtain a conditional logit model (McFadden [1974]). Logit models
estimate the parameters in Equation 4 using the maximized likelihood method with datafrom choice experiments. Here, it should be remembered that estimated variables are
divided by the scale parameter σ, which is unknown to researchers (Train [2003], p41).
Namely,14

It is also possible that we address the constant relative risk aversion (CRRA) type utility function.
Implications obtained below remain unchanged.

12

[e]ach of the coeﬃcients is scaled by 1/σ. The parameter σ is called thescale parameter, because it scales the coeﬃcients to reﬂect the variance of theunobserved portion of utility. (Train [2003])
We cannot obtain the “true” magnitude of the parameters in Equation 3 without additional restriction, since the estimated version of Equation 3 then should be expressed asln Uni =

α∗
β∗
χ∗
ψ∗
ln cni +ln sni +ln Cni +ln Sni + ²n ,
σ
σ
σ
σ
∗

∗

(5)
∗

∗

where the original parameters are obtained as α = ασ , β = βσ , χ = χσ , and ψ = ψσ .
Quoting Train [2003] again,
for interpretation it is useful to recognize that these estimated parameters
are actually estimates of the original coeﬃcients [α, β, χ, and ψ] divided by
the scale parameter σ. The coeﬃcients that are estimated indicate the eﬀectof each observed variable relative to the variance of the unobserved factors. A
larger variance in unobserved factors leads to smaller coeﬃcients, even if theobserved factors have the same eﬀect on utility (i.e., higher σ means lower [α,β, χ, and ψ] even if [α∗ , β ∗ , χ∗ , and ψ ∗ are] the same).
Previous studies, such as Ida and Goto [2009], tended to assume that σ = 1 so that
estimated variables are interpretable without knowledge of σ.15 Such a normalization is
innocuous because Train [2003] showed that the overall scale of utility is irrelevant.16 In
this study, we impose another restriction on the scale parameter σ to obtain our preferred“true” set of parameters.

Ida and Goto [2009] called λ a scale parameter, which is deﬁned as λ = √π6σ . See, for this point,
Louviere, Hensher, and Swait [2000].
16
If we wish to know the diﬀerence of variance between the sub-groups in the study sample, theheteroscedastic logit model can be used. It is interesting to discuss the accuracy of decision making in choice experiments through observing the heterogeneity of error variance among sub-groups(de Palma, Myers, and Papageorgiou [1994]). For further analysis of the heterogeneity of the error termin our research context, see our accompanying paper.
15

13

3.2

Results from conditional logit model

In the conditional logit model, it is assumed that the IIA assumption holds: random
components of each alternative are not correlated. We also assume that the random
components within each subject are not correlated. Later, we proceed to the mixed logit
model where these assumptions are relaxed and the distributions of parameters acrosssubjects are allowed.
Results from the conditional logit model are shown in Table 5. In the left panel, we seethat both self consumption and self saving aﬀect utility positively and signiﬁcantly, as is
expected. On the other hand, the eﬀects of other’s consumption and saving are estimatedto be negative. These eﬀects are signiﬁcant at the 1 percent level. At this point, we canprovide two of our baseline results from the choice experiments as follows. First, the factthat self consumption and self saving aﬀect utility positively will validate our structure of
the survey because the results from the choice experiments conform to textbook economic
assumptions. Next, we can suggest that externalities in the utility function are regulated
as negatives. Hence, the dominating social norm of pecuniary comparison in the Japanese
economy will not be of admiration but of jealousy. This ﬁnding is in line with our previous
results from happiness regressions.
As described above, estimates in Table 5 do not provide the “true” magnitude for theparameter set because they are divided by unknown σ. To obtain a clearer implication on
the shape of utility function, we impose our preferred normalizing assumption that theutility function is homogenous of degree one with respect to own income, that is, the sumof consumption and saving. From the speciﬁcation in Equation 5, we obtain our preferred“true” parameter set by dividing the estimates with 0.3766 + 2.0226 = 2.3992(= 1/σ).
Thus, our choice experiment speciﬁes the shape of utility function which encompasses
negative externalities as
U = c0.157 s0.843 C −0.045 S −0.182 .

(6)

Some further implications can be drawn from Equation 6. First, with respect to self
14

allocation of resources, saving plays a more dominant role than consumption. The ratioof elasticity of utility on self consumption to that on self saving is estimated to 0.186.
The same pattern can be found with respect to other’s consumption and saving. This
inclination to saving may derive from the fact that the survey was conducted in the
midst of the recent ﬁnancial recession. The severe market conditions might have induced
subjects to refrain from consumption behavior such that they increase saving in readinessfor uncertain future economic situations.
Second, we obtain that the welfare loss in a competitive symmetric equilibrium causedby the estimated preference externality is around 2.6 percent, compared to the social optimum.17 While this loss of 2.6 percent compared to the optimum is that resulting froma one-shot economic decision, we may be able to compare our ﬁgure with the results fromdynamic models such as the monetary models of Lucas [2000] and the sticky price modelof Amano, Moran, Murchison, and Rennison [2009] if we refer to the steady state implications of these dynamic models. We argue that the intensity of market ineﬃciency fromsocial preference is comparable to that from inﬂation and price rigidity, and call for more
attention from macroeconomic studies along this line. Also, here we can refer to theoretical studies on consumption externality such as Dupor and Liu [2003], Liu and Turnovsky[2005], Chen and Hsu [2007], Nakamoto [2009a], and Nakamoto [2009b]. From Equation
6,we obtain that the sign of the cross-derivative between self-consumption and other’s consumption is negative, indicating a running-away-from-the-Joneses eﬀect. In other words,
individuals are anti-conformists who dislike being similar to others.18 19
The third implication is that the eﬀect of self-budget will dominate that of the other’sbudget. This point can be conﬁrmed more clearly by considering a utility function which
17

See Appendix 1 for the derivation.
Yamada [2008] investigated a macroeconomic model with conspicuous consumption and showed that
if the social norm is anti-conformity, the development process of the economy is monotonic.
19
We can conﬁrm the concavity of the utility function in Equation 6. In the symmetric equilibrium,
the marginal utility of consumption and saving is positive and increasing in respective arguments. The∂2U ∂2U
utility function has the characteristic of joint concavity with consumption and saving (i.e., ∂C∂C∂S∂S >∂2U).Thisproperty
canbeviewedas
helpfulbecausetheinterior
solutionisguaranteed
when
the
∂C∂S
maximization problem in the symmetric equilibrium is considered.
1815depends on own income i and other’s income I as

U = U (i, I).

(7)

In the survey, the level of own income can be naturally obtained as the sum of self
consumption and self saving. From the right panel of Table 5 in which the result from
Equation 7 is illustrated, we see that the point estimate on self-income is much greaterthan that of other’s income. More importantly, from the 95 percent conﬁdence intervalsof these two variables, we can conﬁrm that the absolute value of the lower bound for
self-income is greater than that for other’s income. Thus, we suggest that raising theincomes of all by the same amount will increase the happiness of all. Put another way,
this ﬁnding contradicts the famous Easterlin paradox (Easterlin [1974], Easterlin [1995])
and favors the money-buys-happiness hypothesis (Alesina et al. [2004]). The novelty ofour paper is that we derived the implication by estimating the shape of utility function
directly with the choice experiment, not from happiness regressions.20
The speciﬁcation of Equation 7 is also useful for estimating CRRA utility function as
appeared in Liu and Turnovsky [2005]. We address a CRRA type utility function of the
form:
U=

1
(iI κ )1−γ .
1−γ

By applying estimates in Table 5, the utility function is speciﬁed as

U=

1(iI −0.3160 )1−0.2739 ,1 − 0.2739

where the scale parameter is obtained as 1/σ = 1/(1 − 0.2739).

20

In addition to happiness studies with micro data, some studies have provided evidence of “money
buys happiness”. Examples include Alesina et al. [2004] and de la Garza et al. [2009]. However, theseminal paper in the literature, Clark and Oswald [1996], showed otherwise. See Clark et al. [2008] foran excellent review.

16

4

Heterogeneity of preference parameters across individual characteristics

4.1

Results from mixed logit model

Table 6 shows the results from a mixed logit model in which distributions of parameters
are allowed. In other words, in the mixed logit model, we can observe heterogeneity ofpreference among respondents. Although we assume that the error term is independently
and identically distributed as in the conditional logit model, the mixed logit model allows
the discrete choice model to apply in the non IIA situation. Estimates in the table
generally show that our previous results obtained with the conditional logit model arerobust. Attributes for self-budget aﬀect utility positively, whereas the externalities are
picked up as negatives.
Table 6 also suggests that the means of estimates from the mixed logit model are notvery diﬀerent from the point estimates from the conditional logit model. While this ﬁnding validates the robustness of previous ﬁndings, the standard deviations estimated may
require some attention. In particular, the standard deviation for the Self Consumption
term looks large compared to the mean and is signiﬁcant. The standard deviation for χ isnot signiﬁcant whereas that for ψ is found to be signiﬁcant at the one percent level. Thisoutcome could imply that heterogeneity in social preference parameters is an important
issue.
The right panel of Table 6 provides another interesting implication. It shows that the
average estimate of the Other’s Income term is negative. The associated standard deviation is large compared to the mean, and more importantly it is signiﬁcant. This implies
that there is large heterogeneity in the parameter for preference externality. Looking at
the distribution of the preference parameter, we can estimate that 64.4 percent of ourstudy sample has negative externality (jealousy) regarding other’s income and that theremaining 35.6 percent have positive preference externality (admiration). This evidence17

serves to support the strategies adopted in theoretical studies on preference externality
such as Liu and Turnovsky [2005] and Nakamoto [2009b] which deal with both jealousy
and admiration. A caveat here is that economists may do better to think about to what
extent jealousy or admiration is pervasive in a macro-economy, rather than to think aboutan economy where preference externality is characterized only by a negative or a positive
one. In that sense, the research agenda of Garcia-Penalosa and Turnovsky [2008] which
considers the heterogeneity of preference parameters is more promising.
The abovementioned ﬁndings suggest that heterogeneity of preference parameter exists, and ask for further analyses on the determinants of preference structure. In the next
section, we provide the results from the conditional logit model with dummy interactions
in order to investigate if diﬀerences in individual characteristics lead to diﬀerences inparameters of utility function.

4.2

Results from conditional logit model with dummy interactions

In the literature of behavioral economics, it is well-recognized that demographic diﬀerences lead to substantial diﬀerences in deep parameters such as the time discount rate
and the rate of risk aversion. Ida and Goto [2009] showed that smokers are endowedwith a higher value of time discounting and a lower value of risk aversion than nonsmokers. Viscusi et al. [2008] showed that eco-conscious individuals have a lower rateof time discounting than those who are not eco-friendly, but that they exhibit a hyperbolic discounting pattern. Small, Winston, and Yan [2005] applied the framework of amixed logit model to investigate the distribution of commuters’ preferences for speedy
and reliable highway travel, ﬁnding that there was substantial heterogeneity in motorists’ values of travel time and reliability, suggesting road pricing policies should bedesigned to cater to various preferences. Hole [2008] investigated preferences of patientsover general practitioner appointments using standard logit, mixed and latent class logit

18

models. He showed that there was signiﬁcant preference heterogeneity for all the attributes in the experiment. Using micro-consumption data, Mastrobuoni and Weinberg[2009] found that those with ﬁnancial assets of less than 5,000 US dollars tend to behave as hyperbolic consumers, while those with more than that amount can smooth theirintra-monthly pattern of consumption. In addition, from the viewpoint of neuroscience,
Tanaka, Doya, Okada, Ueda, Okamoto, and Yamawaki [2004] and McClure, Laibson, Loewenstein, and[2004] showed that separate parts of the human brain make short-run and long-run decisions. Thus, if individual characteristics such as gender or age determine which decision
making part of the brain becomes more active, they may explain diﬀerences in the time
discount rate by those organic variables. In the following analyses, we investigate if differences in individual characteristics have consequences on parameter diﬀerence of social
preference. We consider four acquired individual characteristics as well as two organic
factors as potential sources of parameter heterogeneity.
As a starting point for thinking about heterogeneity issues, it is highly plausible that
diﬀerence in income level or amount of ﬁnancial assets brings about diﬀerences in externality parameters in the utility function. Considering that the rich can make moreof consumption and saving than the poor, this would lead us to expect that the poor
may feel jealousy about other’s consumption, and thus exhibit a higher level of negative consumption/saving externality. On the other hand, taking a diﬀerent line, therich could be considered rich because they have innate characteristics of chasing more
wealth which is derived by negative pecuniary externality. Keynes [1971], Zou [1994] andBakshi and Chen [1996] all suggested that rat races to accumulate wealth among the super rich can be explained by the keeping-up-with-the-Joneses eﬀect (negative externality
associated with asset). As a benchmark, we consider those individuals in an annual income category higher than 8 as the Income Rich group and those with a ﬁnancial asset
category higher than 2 as the Financial Asset Rich group. They account for 14.0 percent
and 34.5 percent of the full sample, respectively.
Another consideration is educational attainment because education itself can work19

as a reputation device and reputation will work as an externality in consumption-saving
decisions. Our conjecture is that individuals with higher academic achievements will beendowed with a higher reputation in society, which makes them more conspicuous. If it istrue, those with higher educational achievements will have stronger negative externality
in consumption and saving. In this study, those with under-graduate or graduate degrees
are classiﬁed into the High Education group. They account for 41.0 percent of the fullsample.
In addition, we consider that the diﬀerence in the location of dwelling may cause
heterogeneity in the individuals’ preferences. For instance, in Japan, it is said that therelationship with neighbors is closer in rural areas than in urban areas. Hence, people
in urban areas may be generally less concerned about other’s consumption and saving,and externalities in their utility function may become weaker. We therefore consider asub-group of those from Tokyo, Osaka, or Nagoya — the Urban group — which consistsof 26.9 percent of our study sample.
Related to the organic variables are the two variables of age and gender. We consider
them because of ﬁndings in neuroscience. Our hypothesis regarding age is as follows.
Since the average life expectancy of the old is in general shorter than that of the young,we assume here that, compared to the young, the old use a higher time discount rate, thus
becoming myopic. This may lead to jealousy of other’s consumption among older people,
which results in greater consumption negative externality amongst the elderly. Along thesame lines, we assume that the young are more concerned about other’s saving becausesaving is activity carried out over an uncertain long future. As a benchmark, we use theYoung group consisting of those under the age of 40. They account for 40.6 percent of
our study sample. Finally, regarding gender, we have no conjectures a priori, but Veblen[1899] provides us with a presumption here. He writes that [f ]rom archaic times down
through all the length of the patriarchal regime it has been the oﬃce of the women to
prepare and administer these luxuries, and it has been the perquisite of the men of gentle
birth and breeding to consume them · · · . This invidious traditional distinction has not20

last its force even among the more advanced peoples of today (p.70). Today’s society ismuch more advanced than in Veblen’s time so such a traditional distinction would havevanished in general, but still, the gender diﬀerence is an interesting point to be pursued
in investigating heterogeneity of preferences. Data from women account for 44.8 percent
of our study sample.
Focusing on diﬀerences in these demographic variables, we add interactions with various dummies into the original four attributes for estimates based on the full sample.
We lost 1,035 observations from the choice experiment because some subjects chose notto provide information on ﬁnancial assets or annual income level, leaving us with 5,847
observations.
Table 7 reports the results with various dummy interactions. From the ﬁrst column,
we can see that those with a higher income feel more jealous about consumption thanthose with a lower income. Also, the signiﬁcance of other’s consumption is lost after
including the dummy interactions. It seems that consumption externality was driven by
preference in the high income group. On the other hand, negative externality related tosaving remained unchanged, and the dummy interaction term for other’s saving is not
signiﬁcant.
Given the stronger negative consumption externality among individuals with a highincome, it is somewhat surprising that the diﬀerence in the amount of ﬁnancial assets
does not lead to parameter heterogeneity, as is shown in the second column of Table 7.
As we will show later, this ﬁnding is quite robust against changes in threshold level for
the Asset Rich group. Note also that the robust standard error of the estimate for other’s
consumption is large, despite still being signiﬁcant at the 10 percent level, after including
the dummy interactions.
Regarding the other two acquired individual characteristics, educational attainment
and place of dwelling, we see that the dummy interaction terms with preference externalities are not signiﬁcant. The estimates for the original four attributes are not very
diﬀerent from those in the baseline conditional logit model (Table 5). Hence, we see that21

the heterogeneity in educational attainments and housing place do not aﬀect preference
parameter heterogeneity.
Much more interesting ﬁndings are shown in the last two columns of Table 7. Although
the eﬀects are seen to have marginal signiﬁcance, younger people have weaker negative
consumption externality and stronger negative saving externality than the elderly. Put
diﬀerently, the elderly have stronger negative consumption externality and weaker negative saving externality. These eﬀects may have something to do with life expectancy and
we refer to the literature of evolutionary economics that considers evolution and adaptionof preference structure. Studies in evolutionary economics have recently examined how
people form an optimal shape of happiness over time.21 Our ﬁndings may suggest that
preference structure is actually chosen in an optimal fashion over time: facing a shorter
life expectancy, the elderly shift negative externality in preference from that related tosaving to that associated with consumption. Because saving will play a minor role in livesof the elderly, this shift of preference structure will mitigate the welfare loss associatedwith consumption. Finally, we see that females feel more jealous with respect to bothconsumption and saving than males. Well after the time of Veblen, our data collected in
March 2009 shows that the socio-economic situation has changed.
To sum up, we see that income diﬀerence, age, and gender result in parameter heterogeneity associated with social preference. Thus, we can conﬁrm that heterogeneity plays
a role in determining the parameters just as previous behavioral economics studies havefound in other ﬁelds. In our case, however, these diﬀerences are picked up weakly, andtherefore we proceed to robustness checks.
In Table 8, we consider all the variables which potentially cause parameter heterogeneity in each equation. Dummy interactions are taken for the original four attributes,
but the results are shown only for preference externality terms. Column (1) shows thebaseline case, where threshold levels of ﬁnancial assets, annual income, and age are given
21

See, for example, Robson [1996], Robson [2001], Rayo and Becker [2007a], Rayo and Becker [2007b],
and Netzer [2009].

22

as category 2, category 8, and 40, respectively. From column (1), we see that the eﬀects
of Income Rich on other’s consumption, of Young on other’s saving, and of Female onother’s consumption and saving are found to remain the same as before. On the other
hand, the eﬀect of Income Rich on other’s saving becomes signiﬁcant, and the eﬀect ofYoung on other’s saving loses its signiﬁcance. This result is, in general, supportive ofprevious ﬁndings. Columns (2) and (3) are threshold changes in the Financial Asset Rich
group in categories 3 and 4, respectively. Columns (4), (5), and (6) are threshold changes
in the Income Rich group in categories 7, 9, and 10, respectively. Finally, in columns (7),(8), and (9), we changed the threshold age for the Young group to 30, 35, and 45, respectively. Through columns (2) – (9), variables other than the variable for the robustness
checks are kept as the baseline value. The results show that our previous ﬁndings are in
general robust to the threshold levels chosen. We therefore conclude that the individual
characteristics that bring about heterogeneity in social preference parameters are income
level, age, and gender. Asset level, educational attainment, and place of dwelling are notfactors to be pursued.

5

Conclusions

In the literature of behavioral economics, important parameters have been estimated via
experiments, and policy implications derived from theoretical studies that address theseparameters have attained a richness and more practical adaptation. Although the social
preference eﬀect is well recognized and although there are a number of happiness studies
that support the view of social preference, direct information on the shape of utility
function with social preference was lacking. In this paper, we have introduced a newframework to the literature of social preference, allowing us to obtain ﬁndings which are
more directly applicable to theoretical studies of social preference than those reported in
the literature of happiness studies.
Here, we speciﬁed the shape of utility function with social preference with the condi23

tional logit and mixed logit models. Our major ﬁndings can be summarized as follows.
First, preference externality is characterized by jealousy rather than admiration among
Japanese respondents. Second, the welfare loss in a competitive symmetric equilibriumcaused by the preference externality is around 2.6 percent, compared to the social optimum. Third, considering demographic diﬀerences, heterogeneity in social preference
parameters was shown to be driven by diﬀerences in income level, age, and gender.
Possible directions of future research include, ﬁrst, a consideration of inter-temporalchoice tasks in order to investigate utility functions which depend on a stock variableof wealth, since in the theoretical literature of social preference, preference externalities
are often considered with wealth externality. Second, using heteroscedastic logit models,
we can investigate diﬀerences in scale parameters across sub-groups of diﬀerent individual
characteristics. Since the scale parameters are inversely proportional to the error variances
in logit models, if there are signiﬁcant diﬀerences in them, it implies that diﬀerent study
groups exhibit diﬀerent levels of comprehension about choice experiments of the kind
we addressed here. Third, we found from the mixed logit model analysis that around
one third of the respondents are endowed with the social preference of admiration, while
the Japanese socio-economy is, on average, characterized by jealousy. These ﬁndings inregard to jealousy and admiration should be validated and investigated by macroeconomic
studies on preference externality. A suggestion from these ﬁndings is that researchers
should think about what types of individual characteristics are related to admiration. We
can investigate this point using Bayesian inverse formula following Ida and Goto [2009].
These last two topics are investigated in our accompanying papers.

24

6

Appendices

6.1

Appendix 1

In this appendix, following Liu and Turnovsky [2005], we illustrate the eﬀects of preference
externalities on individuals’ decisions in order to stimulate the reader’s intuition. An
individual optimally selects the levels of own consumption and own saving to maximize
the utility (1) given own level of income i. Thus, his budget constraint is given by
i = c + s. Since the marginal rate of substitution between consumption and saving isgiven by − ds
= UUsc in (1), the maximizing condition is
dc
−

ds
Uc
=
= 1,
dc
Us

(8a)

where the relative price between consumption and saving is unity. Looking at Figure 3,
we can conﬁrm that at the private maximizing point, the solid curve and the budget constraint intersect. It should be remembered that the individual does not take externalities
from other’s consumption and saving into consideration when private levels of consumption and saving are chosen. Next, we consider the social planner who chooses socially
optimal allocations of consumption and saving, taking account of the eﬀects of preference
externalities. Variables with tilde denote social optimal levels of consumption and saving
chosen by the planner. In this case, the optimal maximizing-condition is given as−

Ũc + ŨC
ds
=
= 1,
dc
Ũs + ŨS

(8b)where preference externalities are taken into account. For simplicity, here we assume thatthe form of utility functions is homothetic, thereby obtaining ŨC = χŨc and US = ψUs ,where χ and ψ are parameters of what. The negative sign of χ (ψ) indicates jealousy
externality about reference consumption (saving). If they are positive, admiration is25

observed. Then, Equation (8b) can be rewritten as−ds(1 + χ)Uc== 1.
dc(1 + ψ)Us(8c)

To focus on the impacts of consumption externalities on the individual’s decision, we
assume that there does not exist the saving externality ψ = 0. In this case, from (8c), we
can obtain (1+χ)Uc = Us . Suppose that subjects feel jealous about reference consumption(i.e., χ < 0). In this case, Uc > Us . Figure 3 depicts this case, showing that the levelof consumption privately chosen is greater than the socially optimal level. Conversely,
when individuals feel admiration, the relationship is reversed. It is easy to see that we
can apply the same logic to the eﬀect of saving externalities.
From our estimates of the parameters given in Table 5, we can see how much theexternalities in utility function reduce welfare in the competitive equilibrium, comparedto the social optimum. From Equation 6 and the budget constraint i = c + s, we obtain
the private optimal allocations as c = 0.157i and s = 0.843i. Assuming a symmetricequilibrium, i = I and c = C, the social optimum then can be obtained as Copt = 0.145i
and Sopt = 0.885i. Hence, assuming away constant terms in the utility function, we seethat the welfare level obtained by the private allocation is reduced by 2.615 percent fromthe socially optimal level.

6.2

Appendix 2

Here we provide some results of the rationality tests. First, one of our questions asked
about the reference group that the subjects deﬁne. Among 1,043 total respondents, 43
speciﬁed that they do not have reference group and do not compare themselves withothers. With this information, we divide our entire sample into two groups; those with areference group and those without a reference group. We divide the entire sample here
because the sample with no reference group could aﬀect the structure of the equation
more generally (Viscusi et al. [2008]).
26

In the experiment, if the subjects understand the socio-economic choice tasks correctly,
we will obtain externalities in the estimated utility function for the sub-groups withreference group, while ξ and ψ will not be signiﬁcantly diﬀerent from zero for those
without reference groups. The number of samples for the ﬁrst sub-group is still as manyas 6,624 while that for the second sub-group is reduced to 224. Table 9 shows the results.
From the left panel, we see that the results obtained above remain unchanged for the
sub-group of those with a reference group. However, the right panel shows an intriguing
pattern for those without a reference group: as for the coeﬃcients of self budget, selfsaving is estimated correctly and is signiﬁcant. On the other hand, other’s consumption
and saving are estimated to be quite close to zero and do not reach signiﬁcance. Becauseof the small number of observations, we do not know how much we can attribute theﬁnding to the rationality of subjects. But still, this ﬁnding will at least provide some,albeit weak, evidence that our choice experiments are valid.
Our second rationality test is related to jealousy. We consider two sub-groups, onewith higher jealousy (with jealousy >= 4) and the other with lower jealousy (with jealousy<= 3). Because the self-reported intensity of jealousy is a demographic variable, we addinteractions of a higher-jealousy dummy, taking value one if jealous >= 4 otherwise zero,to the original four attributes for estimates based on the entire sample. Table 10 shows
the result. As is clearly shown from the second column, the negative externality eﬀect ofother’s saving gets stronger for the sub-sample with higher jealousy, as is expected. Whilethe externality in other’s consumption is indiﬀerent between those with or without higherjealousy, we would attribute this outcome to a general inclination to saving behavior
among our subjects.
Following Heberlein, Wilson, Bishop, and Schaeﬀer [2005], Table 11 shows the resultof the scope tests. With respect to Self Saving, estimates indicate that larger saving isrelated to higher utility. Estimates for dummies related to Self Consumption are notsigniﬁcant and this outcome seems to imply “moral purchase property” regarding Self
Consumption (Kahneman and Knetsch [1992]). Nevertheless, we attribute this rather
27

disappointing result to the general inclination of subjects to saving. The estimate for
Other’s Consumption 4 is as expected, while the eﬀects of Other’s Consumption 2 andOther’s Consumption 3 are not signiﬁcant. However, the sign is in the right direction.
Finally, the estimates of Other’s Saving 3 and Other’s Saving 4 seem to be acceptable but
the magnitudes of the point estimates are reversed. Note that there is overlap for thoseestimates in the 95 percent conﬁdence intervals (not shown). The evidence presented
above in general supports the validity of our choice experiment.

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34

4

14

3.5

12

Pecuniary Satisfaction

10
2.5
8
2
6
1.5
4

Reference Income Category

3

1
2

0.5

0

0
1

2

3

4

5

6

7
8
9
Own Income Category

Happiness

10

11

12

13

14

15

Reference Income Category

Figure 1: Happiness and Reference Income Level across Own Income Level

35

4

9

3.5

3

Jealousy

7
2.5
6
2

Reference Income Category

8

5

1.5

1

4
1

2

3
Pecuniary Satisfaction
Jealousy

4

5

Reference Income Category

Figure 2: The Level of Jealousy and Reference Income Level across Happiness Level
s

S̃ ∗
s∗

c
∗
c
C̃
Figure 3: Marginal Rate of Substitution with or without Social Preference∗36

Table 1: Descriptive Statistics

Variable
Female [0,1]Age in years
Middle School [0,1]High School [0,1]College/ Post Grad [0,1]Married [0,1]N

Whole sample
Mean Std. Dev.

Male
Mean Std. Dev.

FemaleMean Std. Dev.

0.48
44.86
0.03
0.33
0.39
0.65

44.69
0.03
0.30
0.50
0.65

45.04
0.03
0.36
0.27
0.66

0.50
14.62
0.18
0.47
0.49
0.48
1043

14.33
0.18
0.46
0.50
0.48
547

37

14.95
0.17
0.48
0.45
0.48
496

38

IncomeCategory
in million JPY (survey)
in million JPY (reg)N
IncomeCategory (cont’d)in million JPY (survey)
in million JPY (reg)N
Financial Asset Category
in million JPY (survey)
in million JPY (reg)
N

1
0
0
103
14
[15,20)
17.5
3
1
[0,5)
1
567

2
(0,1)
0.5
170
15
[20,)
22.5
3
2
[5,10)
7.5
123

3[1, 2)
1.5
113
16
N.A.
N.A.
65
3
[10,20)1590
4[20,30)
25
41

4
[2,3)
2.5
136

5
[30,40)
35
21

5
[3,4)
3.5
121

6
[40,50)
45
9

6
[4,5)
4.5
108

7
[50,60)
55
7

7
[5,6)
5.5
97

8
[60,70)
65
3

8
[6,7)
6.5
36

Table 2: Income and Financial Asset Categories

9[70,80)
75
3

9
[7,8)
7.5
30

10
[80,90)
85
0

10
[8,9)
8.5
26

11
[90,100)
95
2

11[9,10)
9.5
912[100,)
1108

12[10,12)
11
15

13
N.A.
N.A.
169

13
[12,15)13.5
8

Table 3: Happiness Regressions (PART 1)(2)
Happiness
0.01(0.01)-0.03*(0.02)(3)
Happiness

0.34***(0.03)
Observations
866
866
Robust standard errors in parentheses*** p¡0.01, ** p¡0.05, * p¡0.1

0.35***(0.03)
866

Dep var.
log income
log reference income(1)
Happiness
0.02***(0.01)-0.02(0.02)-0.03(0.02)

Jealousy
log ﬁnancial asset

39(4)Happiness
0.02***(0.01)-0.02(0.02)-0.13***(0.04)

866(5)
Happiness-0.03(0.02)-0.09**(0.04)
0.34***(0.03)
866(6)
Happiness
0.01(0.01)-0.03*(0.02)-0.09**(0.04)
0.34***(0.03)
866

40
866

yes

(8)
Happiness
0.01(0.01)-0.04**(0.02)-0.09**(0.04)
0.34***(0.03)

femaleregionoccupation
education
number of childmarital status
Observations
866
Robust standard errors in parentheses*** p¡0.01, ** p¡0.05, * p¡0.1

log ﬁnancial asset

Jealousy

log reference income

Dep var.
log income(7)
Happiness
0.01*(0.01)-0.03*(0.02)-0.09**(0.04)
0.34***(0.03)
yes

866

yes

(9)
Happiness
0.03***(0.01)-0.03(0.02)-0.09**(0.04)
0.32***(0.03)

866

yes

(10)
Happiness
0.01(0.01)-0.03*(0.02)-0.08**(0.04)
0.34***(0.03)

866

yes

(11)
Happiness
0.01(0.01)-0.03*(0.02)-0.09**(0.04)
0.34***(0.03)

Table 4: Happiness Regressions (PART 2)

yes
866

(12)
Happiness
0.01(0.01)-0.04*(0.02)-0.09**(0.04)
0.34***(0.03)(13)
Happiness
0.04***(0.01)-0.03(0.02)-0.09**(0.04)
0.34***(0.03)
yes
yes
yes
yes
yes
yes
866

41

Conditional Logit Coeﬃcient(Robust Standard Error)
Self Comsuption 0.3766***(0.0987)
Self Saving 2.0226***(0.1059)
Other’s Consumption -0.1099***(0.0397)
Other’s Saving -0.4376***(0.0397)*** p¡0.01, ** p¡0.05, * p¡0.1

Variable
Self Income
Other’s Income

Variable

Conditional Logit Coeﬃcient(Robust Standard Error) 95 percent Conf. Interval
1.3772***(0.0987) 1.0805
1.6739-0.4352***(0.1059) -0.5485-0.3218

Table 5: Conditional Logit Estimates of Situation ChoiceTable 6: Mixed Logit Estimates of Situation Choice
Variable

Mixed Logit Coeﬃcient(Standard Deviation)
Self Comsuption 0.4136*** (3.0186)***
Self Saving 4.2566*** (2.9469)***Other’s Consumption -0.3492***(0.2503)
Other’s Saving -0.8497*** (0.8140)****** p¡0.01, ** p¡0.05, * p¡0.1

42

Variable
Self Income
Other’s Income

Mixed Logit Coeﬃcient(Standard Deviation)
1.7890***(0.0165)-0.4515*** (1.2240)***43
0.2698(0.308)0.3450(0.340)-0.5107***(0.138)-0.1900(0.132)0.4205***(0.116)2.0461***(0.124)-0.03699(0.0461)-0.4444***(0.0465)

Income Rich (>= 8)

Dymmy Interactions
Self Comsuption* DummySelf Saving* DummyOther’s Consumption* DummyOther’s Saving* Dummy*** p¡0.01, ** p¡0.05, * p¡0.1

Other’s Saving

Other’s Consumption

Self Saving

Type of dummy
Variable
Self Comsuption-0.3066(0.224)-0.2019(0.242)-0.01384(0.0911)-0.04800(0.0916)0.1294(0.217)-0.01727(0.233)0.1213(0.0877)-0.05072(0.0882)-0.1142(0.246)
0.4833*(0.269)-0.1311(0.100)-0.003005(0.100)0.08209(0.220)0.1693(0.237)0.1637*(0.0883)-0.1568*(0.0892)

Asset Rich (>=2) High Education
Urban Young (<40)
Conditional Logit Coeﬃcient (Robust Standard Error)
0.5507***0.3972*** 0.4809***0.4177***(0.133)(0.140)(0.124)(0.137)2.1489***2.0929*** 1.9723***2.0166***(0.142)(0.152)(0.132)(0.146)-0.09729*-0.1521***-0.07173-0.1642***(0.0536)(0.0570)(0.0500)(0.0560)-0.4497***-0.4477*** -0.4698***-0.4083***(0.0536)(0.0567)(0.0503)(0.0556)

Table 7: Conditional Logit Estimates with Various Dummy Interactions-0.3165(0.218)0.5274**(0.237)-0.1584*(0.0891)-0.1665*(0.0889)

0.5960***(0.141)
1.8980***(0.148)-0.04200(0.0561)-0.4047***(0.0568)

Female44(2)0.7252***(0.234)1.6822***(0.247)-0.04594(0.0943)-0.2678***(0.0938)(1)

0.7320***(0.242)1.6809***(0.256)-0.02287(0.0978)-0.1966**(0.0977)-0.5178***(0.174)-0.3468**(0.169)0.07912(0.101)-0.1092(0.103)0.09430(0.0940)-0.04433(0.0941)0.1283(0.0958)-0.2337**(0.0974)-0.1825*(0.0961)-0.2369**(0.0957)-0.1102(0.102)0.03343(0.102)-0.3143(0.202)-0.3785**(0.193)0.04871(0.101)-0.1062(0.102)0.08733(0.0941)-0.04909(0.0941)0.1499(0.0958)-0.2298**(0.0973)-0.1470(0.0954)-0.2327**(0.0947)-0.1174(0.103)0.03671(0.102)-0.6120***(0.150)-0.2670*(0.145)0.09476(0.100)-0.06337(0.101)
0.09183(0.0955)-0.06695(0.0953)0.2076*(0.117)-0.09486(0.120)-0.2358**(0.0971)-0.2422**(0.0969)-0.08409(0.102)0.02293(0.102)

(3)
(4)
(5)
(6)
(7)
Conditional Logit Coeﬃcient (Robust Standard Error)
0.5874** 0.7745*** 0.6955*** 0.6905*** 0.6346***(0.229)(0.251)(0.238)(0.235)(0.220)1.6177*** 1.8034*** 1.6526*** 1.6884*** 1.7334***(0.242)(0.266)(0.249)(0.247)(0.233)-0.03177-0.03125-0.07810-0.1121-0.02392(0.0921)(0.101)(0.0961)(0.0953)(0.0890)-0.2612***-0.1933*-0.2159** -0.2233** -0.2855***(0.0919)(0.101)(0.0964)(0.0955)(0.0901)

Dummy Interactions
Other’s Consumption -0.6365*** -0.6611*** -0.6564*** -0.3361**** Income Rich
(0.150)(0.150)(0.150)(0.114)
Other’s Saving-0.2921**-0.3371**-0.3275**-0.1719* Income Rich
(0.145)(0.145)(0.145)(0.114)
Other’s Consumption
0.08830
0.2488**0.2915*0.07945* Financial Asset Rich
(0.102)(0.118)(0.154)(0.103)
Other’s Saving-0.1261
0.09570
0.1073-0.1216* Financial Asset Rich
(0.103)(0.119)(0.152)(0.103)
Other’s Consumption
0.10280.080390.09801
0.1125* High Education(0.0944)(0.0949)(0.0938)(0.0941)
Other’s Saving-0.04742-0.07603-0.07049-0.03682* High Education(0.0944)(0.0946)(0.0936)(0.0943)
Other’s Consumption
0.11220.14300.12730.1393* Young(0.0958)(0.0961)(0.0937)(0.0954)
Other’s Saving-0.2364**-0.1699*-0.1776*-0.2264*** Young(0.0974)(0.0967)(0.0942)(0.0971)
Other’s Consumption-0.2369**-0.2319**-0.2243**-0.2251*** Female(0.0974)(0.0975)(0.0976)(0.0994)
Other’s Saving-0.2494**-0.2437**-0.2418**-0.2532*** Female(0.0968)(0.0969)(0.0969)(0.0990)
Other’s Consumption-0.08608-0.09411-0.09145-0.1091* Urban(0.103)(0.102)(0.103)(0.103)
Other’s Saving
0.039900.026120.03032
0.02933* Urban(0.102)(0.102)(0.102)(0.102)
Dymmy interactions with Self Consumption and Self Saving included.
*** p¡0.01, ** p¡0.05, * p¡0.1

Other’s Saving

Other’s Consumption

Self Saving

Robustness Check
Variable
Self Comsuption(8)-0.6199***(0.150)-0.2982**(0.146)0.08738(0.101)-0.09829(0.102)0.08996(0.0958)-0.03381(0.0963)0.1459(0.104)-0.2125**(0.107)-0.2362**(0.0973)-0.2429**(0.0970)-0.09044(0.103)0.03922(0.102)0.6405***(0.228)1.6581***(0.242)-0.01827(0.0917)-0.2456***(0.0921)

Table 8: Conditional Logit Estimates with Various Dummy Interactions (Robustness Check)-0.6272***(0.149)-0.2905**(0.145)0.1014(0.104)-0.1307(0.105)0.1170(0.0937)-0.06641(0.0933)
0.1233(0.0954)-0.2231**(0.0966)-0.2357**(0.0972)-0.2450**(0.0967)-0.08955(0.103)0.04036(0.102)

0.7934***(0.253)1.7553***(0.267)-0.04811(0.104)-0.1764*(0.104)(9)

Table 9: Conditional Logit Estimates of Situation Choice: Subsample Analysis
Sub-group
Variable

Subjects with Reference Group
Conditional Logit Coeﬃcient(Robust Standard Error)
Self Comsuption 0.3858***(0.1003 )Self Saving 2.0307***(0.1074)
Other’s Consumption -0.1133***(0.0404)
Other’s Saving -0.4530***(0.0405)
N6648*** p¡0.01, ** p¡0.05, * p¡0.1

Subjects w/o Reference Group
Conditional Logit Coeﬃcient(Robust Standard Error)
0.2316(0.5599)
1.925***(0.6387)
0.0478(0.2237)-0.0205(0.2088)
224

Table 10: Conditional Logit Estimates with Higher-Jealousy Dummy Interactions
Type of dummy
Variable

Baseline
Conditional Logit Coeﬃcient(Robust Standard Error)
0.3766***(0.0987)
2.0226***(0.1059)-0.1099***(0.0397)-0.4376***(0.0397)

Self Comsuption
Self Saving
Other’s Consumption
Other’s Saving
Dummy interaction (SC)Dummy interaction (SS)
Dummy interaction (RC)Dummy interaction (RS)*** p¡0.01, ** p¡0.05, * p¡0.1

Jealous
Conditional Logit Coeﬃcient(Robust Standard Error)
0.4133***(0.1154)2.0630***(0.1230)-0.0870*(0.0462)-0.3775***(0.0462)-0.1286(0.2241)-0.1374(0.2431)-0.0867(0.0913)-0.2262**(0.0908)

Table 11: Conditional Logit Estimates, Scope Test
Variable

Conditional Logit Coeﬃcient(Robust Standard Error)
Self Comsuption 0.3766*** (0.0987)
Self Comsuption 2-0.1033 (0.2426)
Self Comsuption 3
0.0187 (0.4060)
Self Comsuption 4-0.1174 (0.5224)
Self Saving 2.0226*** (0.1059)
Self Saving
0.7756*** (0.2361)
Self Saving
1.3112*** (0.4579)
Self Saving
2.3669*** (0.4590)
Other’s Consumption -0.1099*** (0.0397)
Other’s Consumption 2-0.1319 (0.1720)
Other’s Consumption 3-0.0638 (0.1544)
Other’s Consumption 4-0.2855*** (0.0887)
Other’s Saving -0.4376*** (0.0397)
Other’s Saving 2-0.0415 (0.1513)
Other’s Saving 3-0.4207*** (0.0973)
Other’s Saving 4-0.2883** (0.1332)*** p¡0.01, ** p¡0.05, * p¡0.145