Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/185740
Authors: 
Friedrichsen, Jana
Year of Publication: 
2018
Series/Report no.: 
Discussion Paper 70
Abstract: 
This paper analyzes optimal product lines when consumers differ both in their taste for quality and in their desire for social image. The market outcome features partial pooling and product differentiation that is not driven by heterogeneous valuations for quality but by image concerns. A typical monopoly outcome is a two-tier product line resembling a \"masstige\" strategy as observed in luxury goods markets. Products can have identical quality and differ only in price and image, thereby rationalizing quality-equivalent line extensions. Under competition, both average quality and market coverage are (weakly) higher but monopoly can yield higher welfare than competition.
Subjects: 
image concern
conspicuous consumption
two-dimensional screening
nonlinear pricing
JEL: 
L12
L15
D11
D21
D82
Document Type: 
Working Paper
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