A Generative Model of Conspicuous Consumption and Status Signaling

TL;DR

This paper introduces a computational model explaining how status symbols and social signaling emerge dynamically through social interactions, using simulations of language model agents to replicate real-world phenomena like luxury pricing and subculture formation.

Contribution

It presents a novel theory of status signaling based on appropriateness and social feedback, validated through LLM-based simulations demonstrating emergent social behaviors.

Findings

Emergence of price run-ups and Veblen effects in simulations

Social influence drives formation of subcultures and signaling behaviors

Model bridges micro cognition and macro social phenomena

Abstract

Status signaling drives human behavior and the allocation of scarce resources such as mating opportunities, yet the generative mechanisms governing how specific goods, signals, or behaviors acquire prestige remain a puzzle. Classical frameworks, such as Costly Signaling Theory, treat preferences as fixed and struggle to explain how semiotic meaning changes based on context or drifts dynamically over time, occasionally reaching tipping points. In this work, we propose a computational theory of status grounded in the theory of appropriateness, positing that status symbols emerge endogenously through a feedback loop of social observation and predictive pattern completion. We validate this theory using simulations of groups of Large Language Model (LLM)-based agents in the Concordia framework. By experimentally manipulating social visibility within naturalistic agent daily routines, we demonstrate that social interactions transform functional demand into status-seeking behavior. We observe the emergence of price run-ups and positive price elasticity (Veblen effects) for both real-world luxury items and procedurally generated synthetic goods, ruling out pretraining bias as the sole driver. Furthermore, we demonstrate that "influencer" agents can drive the endogenous formation of distinct subcultures through targeted sanctioning, and find that similar social influence effects generalize to non-monetary signaling behaviors. This work provides a generative bridge between micro-level cognition and macro-level economic and sociological phenomena, offering a new methodology for forecasting how cultural conventions emerge from interaction.