Working paper 3/2019

Escalation and Well-being

Fabio D’Orlando and Sharon Ricciotti
Università di Cassino e del Lazio Meridionale

June, 2019

Abstract: Escalation is a key characteristic of many consumption behaviors that has not received the theoretical attention it deserves. The aim of this paper is to propose both a definition and a theoretical treatment of escalation in consumption. We shall define escalation as the attempt to engage in consumption acts that are “more intense” on a measurable quantitative or qualitative, objective or subjective, scale (more difficult ski slopes, stronger drugs, harder sex, better restaurants, riskier games, etc.), even if, previously, the subject preferred less intense consumption behaviors. Further, this evolution in preferences also occurs if the budget constraint does not change. We will find endogenous and exogenous theoretical microfoundations for escalation in models of hedonic adaptation, desire for novelty, acquisition of consumption skills, rising aspirations, positional effects, and envy. However, we will also discuss the possibility that the tendency to escalate is a specific innate behavior inherent to human nature. Finally, we will propose a preliminary theoretical formalization of such behavior and indicate the possible implications of taking escalation into adequate consideration.

JEL codes: B52, D11, D90, D91, I31

Keywords: Escalation, hedonic adaptation, consumption skills, envy, innovativeness, positional effects, aspirations

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