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Image Concerns and the Provision of Quality

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  • Friedrichsen, Jana

Abstract

Consumption patterns can be indicative of how a consumer wants to be perceived by others. In this paper, I study markets where consumers are heterogeneous with respect to both their concerns for the quality of goods and the image associated with buying them. Consumers with a taste for quality lend a positive image to the product of their choice and thereby increase the product's value to others. A monopolist restricts the product portfolio and charges price premia to allocate image along with quality. Heterogeneity in image concerns thereby provides a rationale for pooling consumers with differing quality preferences. Although image is correlated with a product's quality in equilibrium, an increase in the value of image may decrease quality provision. In a competitive market, premium prices are unsustainable so that image-concerned consumers buy excessive quality instead. By restricting the product space, monopoly allows for more efficient allocation of image and may therefore yield higher welfare than competition. Policy options to remedy the efficiency losses are discussed.

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  • Friedrichsen, Jana, 2014. "Image Concerns and the Provision of Quality," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100365, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc14:100365
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    Cited by:

    1. Sofia Lundberg & Per-Olov Marklund & Elon Strömbäck, 2016. "Is Environmental Policy by Public Procurement Effective?," Public Finance Review, , vol. 44(4), pages 478-499, July.
    2. Friedrichsen, Jana, 2013. "Image concerns and the provision of quality," Discussion Papers, Research Unit: Market Behavior SP II 2013-211, WZB Berlin Social Science Center.
    3. Jana Friedrichsen & Dirk Engelmann, 2013. "Who Cares for Social Image? Interactions between Intrinsic Motivation and Social Image Concerns," CESifo Working Paper Series 4514, CESifo.

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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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