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Dress to Impress: Brands as Status Symbols

Author

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  • Rogério Mazali
  • José Rodrigues-Neto
Abstract
We analyzed the market for indivisible, pure status goods. Firms produce and sell different brands of pure status goods to a population that is willing to signal individual abilities to potential matches in another population. Individual status is determined by the most expensive status good one has. There is a strati.ed equilibrium with a finite number of brands. Under constant tax rates, a monopoly sells different brands to social classes of equal measure, while in contestable markets, social classes have decreasing measures. Under optimal taxation, contestable markets have progressive tax rates, while a monopoly faces an adequate flat tax rate to all brands. In contrast with the literature, subsidies may be socially optimal, depending on the parameters, in both market structures.

Suggested Citation

  • Rogério Mazali & José Rodrigues-Neto, 2011. "Dress to Impress: Brands as Status Symbols," ANU Working Papers in Economics and Econometrics 2011-567, Australian National University, College of Business and Economics, School of Economics.
    • Handle: RePEc:acb:cbeeco:2011-567
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    File URL: https://www.cbe.anu.edu.au/researchpapers/econ/wp567.pdf
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    2. Adriani, Fabrizio & Sonderegger, Silvia, 2019. "A theory of esteem based peer pressure," Games and Economic Behavior, Elsevier, vol. 115(C), pages 314-335.
    3. Friedrichsen, Jana, 2016. "Signals sell: Designing a product line when consumers have social image concerns," Discussion Papers, Research Unit: Market Behavior SP II 2016-202, WZB Berlin Social Science Center.
    4. Friedrichsen, Jana, 2018. "Signals Sell: Product Lines when Consumers Differ Both in Taste for Quality and Image Concern," Rationality and Competition Discussion Paper Series 70, CRC TRR 190 Rationality and Competition.
    5. Juliana Lucena do Nascimento & Rogério Mazali, 2023. "Technological innovations and preexisting markets: The interaction between Airbnb and New York's hotel and housing markets," Regional Science Policy & Practice, Wiley Blackwell, vol. 15(2), pages 256-287, April.
    6. Yuexuan Gong & Pengzhi XU, 2019. "College Students’ Perceived Brand Value in Service and Manufacturing Categories," Annals of Social Sciences & Management studies, Juniper Publishers Inc., vol. 4(2), pages 29-34, August.
    7. Jebarajakirthy, Charles & Das, Manish, 2020. "How self-construal drives intention for status consumption: A moderated mediated mechanism," Journal of Retailing and Consumer Services, Elsevier, vol. 55(C).
    8. Heidhues, Paul & Köszegi, Botond, 2018. "Behavioral Industrial Organization," CEPR Discussion Papers 12988, C.E.P.R. Discussion Papers.
    9. Kármen Kovács, 2015. "The Effects and Consequences of Simultaneously Arising Different Network Externalities on the Demand for Status Goods," Metroeconomica, Wiley Blackwell, vol. 66(3), pages 375-396, July.

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    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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