[bradley13]

I remember a study from many years ago: people want to be better off than their immediate peers, regardless of where this puts them on an absolute scale.

The study went something like this. Which do you prefer? 1. You earn $250k but all your friends earn $500k. 2. You earn $125k, but all your friends earn $75k.

It was more refined then that, but anyway: most people picked (2).

[somenameforme]

I'm also familiar with that study, but I think it's a bit misleading because it implies the behavior is irrational by associating a fixed cost with everything. In reality, there's a perfectly rational logic that I think most people may subconsciously adapt to.

Imagine I give you a guaranteed $100k/year with the nuance that you're not allowed to earn any money beyond that, as the study implied that was your personal earnings. Where are you going to go live? In an area where most people are earning $200k or in an area where most people are earning $50k? It's the exact same question in effect, but now the phrasing makes it obvious that the choice is completely rational.

It's not about wanting to psychologically dominate your peers, but about making your money go further. If your friends are all earning twice what you do, then you're likely to struggle to afford even a decent house in a reasonable part of town. This logic breaks down at extremes of wealth, but $250k/year is nowhere near that point.