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Dress to Impress: Brands as Status Symbols

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  • Rogério Mazali

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  • José Rodrigues-Neto

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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 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.

Suggested Citation

  • Rogério Mazali & José Rodrigues-Neto, 2011. "Dress to Impress: Brands as Status Symbols," ANU Working Papers in Economics and Econometrics 2011-567, Australian National University, College of Business and Economics, School of Economics.
  • Handle: RePEc:acb:cbeeco:2011-567
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    File URL: https://www.cbe.anu.edu.au/researchpapers/econ/wp567.pdf
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    References listed on IDEAS

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    Cited by:

    1. Friedrichsen, Jana, 2016. "Signals sell: Designing a product line when consumers have social image concerns," Discussion Papers, Research Unit: Market Behavior SP II 2016-202, Social Science Research Center Berlin (WZB).

    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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