A Social-Status Rationale for Repugnant and Protected Market Transactions
48 Pages Posted: 31 Jul 2018 Last revised: 19 Oct 2018
Date Written: October 10, 2018
Individuals deem repugnant and societies proscribe market transactions in sex, organs, and surrogacy — despite potential gains from trade. We resolve this tension by observing that repugnance norms help status-conscious individuals. We study an exchange economy in which agents abhor consumption dominance: one loses social status if another consumes more of every good. Repugnance norms forestall dominance by partitioning goods into submarkets and proscribing trade across submarkets. With multiple equilibria, there is scope for coordinating on, or protecting, status goods.
Keywords: repugnant transactions, protected transactions, social status, market design
JEL Classification: D02, D47, D50, D63, D62
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