Dress to Impress: Brands as Status Symbols

Games and Economic Behavior, Vol. 82, p. 103-131.

Posted: 26 Jun 2013 Last revised: 7 Sep 2013

Date Written: February 27, 2013

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 stratifi…ed equilibrium with a fi…nite 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 extant literature, subsidies may be socially optimal, depending on the parameters in both market structures.

Keywords: brand, competition, free entry, matching, monopoly, signaling, status, tax, welfare

JEL Classification: C78, H23, L12, L15

Suggested Citation

Mazali, Rogerio and Rodrigues-Neto, Jose Alvaro, Dress to Impress: Brands as Status Symbols (February 27, 2013). Games and Economic Behavior, Vol. 82, p. 103-131.. Available at SSRN: https://ssrn.com/abstract=2285163

Rogerio Mazali (Contact Author)

Catholic University of Brasilia ( email )

SGAN 916, Módulo B, Asa Norte
Brasília, DF 70790-160
Brazil
+55 61 3448-7192 (Phone)

HOME PAGE: http://www.ucb.br

No contact information is available for Jose Alvaro Rodrigues-Neto

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