Self-induced class stratification in competitive societies of agents: Nash stability in the presence of envy

Abstract

Envy, the inclination to compare rewards, can be expected to unfold when inequalities in terms of pay-off differences are generated in competitive societies. It is shown that increasing levels of envy lead inevitably to a self-induced separation into a lower and an upper class. Class stratification is Nash stable and strict, with members of the same class receiving identical rewards. Upper-class agents play exclusively pure strategies, all lower-class agents the same mixed strategy. The fraction of upper-class agents decreases progressively with larger levels of envy, until a single upper-class agent is left. Numerical simulations and a complete analytic treatment of a basic reference model, the shopping trouble model, are presented. The properties of the class-stratified society are universal and only indirectly controllable through the underlying utility function, which implies that class-stratified societies are intrinsically resistant to political control. Implications for human societies are discussed. It is pointed out that the repercussions of envy are amplified when societies become increasingly competitive.