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Dress to impress: Brands as status symbols

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  • Mazali, Rogério
  • Rodrigues-Neto, José A.

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 stratified 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 extant literature, subsidies may be socially optimal, depending on the parameters, in both market structures.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 82 (2013)
Issue (Month): C ()
Pages: 103-131

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Handle: RePEc:eee:gamebe:v:82:y:2013:i:c:p:103-131

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Web page: http://www.elsevier.com/locate/inca/622836

Related research

Keywords: Brand; Competition; Free entry; Matching; Monopoly; Signaling; Status; Tax; Welfare;

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