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Signals sell: Designing a product line when consumers have social image concerns
[Arbeitspapier]
Körperschaftlicher Herausgeber
Wissenschaftszentrum Berlin für Sozialforschung gGmbH
Abstract One important function of consumption is for consumers to show off their taste, virtue or wealth. While empirical observations suggest that producers take this into account, existing research has concentrated on analyzing the demand side. This paper investigates how a monopolist optimally designs it... mehr
One important function of consumption is for consumers to show off their taste, virtue or wealth. While empirical observations suggest that producers take this into account, existing research has concentrated on analyzing the demand side. This paper investigates how a monopolist optimally designs its product line when consumers differ both in their taste for quality and their desire for a positive social image. The monopolist distorts qualities and prices to allocate images to consumers. It generically pools consumers with different tastes because high-taste consumers lend a positive image to the product of their choice and thereby increase the product's value to others. Often, average quality is lower than in a market without image concerns and there is underprovision as compared to the welfare-maximizing allocation. Although average quality is higher in a competitive market, welfare typically is not.... weniger
Thesaurusschlagwörter
Konsum
Klassifikation
Wirtschaftssoziologie
Freie Schlagwörter
conspicuous consumption; image motivation; mechanism design; two-dimensional screening
Sprache Dokument
Englisch
Publikationsjahr
2016
Erscheinungsort
Berlin
Seitenangabe
48, B.21 S.
Schriftenreihe
Discussion Papers / Wissenschaftszentrum Berlin für Sozialforschung, Forschungsschwerpunkt Markt und Entscheidung, Abteilung Verhalten auf Märkten, SP II 2016-202
Handle
https://hdl.handle.net/10419/129101
Status
Veröffentlichungsversion; begutachtet
Lizenz
Deposit Licence - Keine Weiterverbreitung, keine Bearbeitung