Steve and Don are neighbours who work at the same firm and hold the same title.Steve finds that when Don's consumption rises,he feels worse off.Don feels the same way towards Steve's consumption.
-Refer to the information above.Suppose that Don buys a new Lexus and shortly thereafter Steve buys a new Audi.Steve and Don seem to be
A) just making consumption decisions.
B) unmoved by the other's actions.
C) involved in a positional arms race.
D) imposing external benefits on each other.
E) demanders of high-quality cars.

Question

Quizplus · Accepted Answer

Steve and Don's behavior indicates that they are engaged in a positional arms race, where they compete for a higher status relative to each other through their consumption choices. Each person's consumption choices are influenced by the other's choices, which suggests that they are not just making independent consumption decisions. Additionally, the fact that they feel worse off when the other person's consumption rises suggests that they are experiencing negative externalities from each other's consumption.

Steve and Don Are Neighbours Who Work at the Same