Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/38721
Authors: 
Thomas, Tobias
Year of Publication: 
2008
Series/Report no.: 
Diskussionspapier // Helmut-Schmidt-Universität Universität der Bundeswehr Hamburg, Fächergruppe Volkswirtschaftslehre 86
Abstract: 
This contribution provides a game theoretical derivation of market demand as a function of the level and distribution of income in the considered economy: if (i) the price is low, everyone buys the good; if (ii ) the price is high, only the rich buy the good (a status good in a narrow sense). If (iii) the price is located in very high or in middle range, demand collapses. With this, we explain the critical price from which a status good acts as a distinctive signal. In addition, this approach shows the potential welfare-improving impact of conspicuous consumption. Taking these results into account, recommendations by numerous economists to prevent the welfare losses of conspicuous consumption by introducing a luxury tax are highly questionable.
Subjects: 
luxury tax
conspicuous consumption
mating model
signaling game
status good
JEL: 
C70
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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