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Dress to Impress: Brands as Status Symbols

  • Rogério Mazali

    ()

  • José Rodrigues-Neto

    ()

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.

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Paper provided by Australian National University, College of Business and Economics, School of Economics in its series ANU Working Papers in Economics and Econometrics with number 2011-567.

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Length: 47 Pages
Date of creation: Dec 2011
Date of revision:
Handle: RePEc:acb:cbeeco:2011-567
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