Exploitation of Common Property Resources when Happiness Depends on Relative Consumption

We introduce a dynamic model of resource-grabbing by status-conscious agents, i.e., agents value not only their absolute consumption levels, but also the relative status within his/her reference group. The purpose of this paper is to explore the e¤ect of the "positional externalities " on the urge to seek rent and to connect the "tragedy of the commons " problem with relative consumption. Our model shows that the greater is agentsconcern about their relative status, the more aggressively they tend to behave. Consequently, the social welfare is lower because the growth rate of the public asset is reduced due to higher extraction rate. After introducing heterogeneity, we show that the social welfare decreases as the distribution of status-consciousness among agents widens. JEL Classi\u85cation: C73 D62 Q2