  This paper adapts ideas from social identity theory to set out a new
framework for modelling conspicuous consumption. Agents derive status from
their own conspicuous consumption and from belonging to an identity group with
high conspicuous consumption. Importantly, these two sources of status are
substitutes. Agents also feel pressure to conform with their neighbours in a
network. This framework can rationalise a set of seemingly conflicting stylised
facts about conspicuous consumption that are currently explained by different
families of models. In addition, our model delivers new testable predictions
regarding the effect of network structure and income inequality on conspicuous
consumption.
