Even though conspicuous consumption can serve as a credible signal of ability, it can lead to socially inefficient outcomes because:
A)conspicuous consumption has been demonstrated to be poorly correlated with ability.
B)conspicuous consumption is not highly correlated with earnings.
C)conspicuous consumption can lead to positional arms races.
D)earnings and ability are very poorly correlated.

Question

Quizplus · Accepted Answer

Conspicuous consumption can be seen as a positional arms race in which individuals make ever-larger increases in their consumption in order to signal their ability.

Even Though Conspicuous Consumption Can Serve as a Credible Signal