Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/90651
Authors: 
Friedrichsen, Jana
Year of Publication: 
2013
Series/Report no.: 
WZB Discussion Paper SP II 2013-211
Abstract: 
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 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. Monopoly may therefore yield higher welfare than competition. Policy options to remedy the efficiency losses are discussed.
Subjects: 
image motivation
conspicuous consumption
two-dimensional screening
ethical consumption
JEL: 
D21
D82
L15
Document Type: 
Working Paper

Files in This Item:
File
Size
932.26 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.