What price makes a good a status good? Results from a mating game |
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Authors: | Tobias Thomas |
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Institution: | 1. Department of Economics and Social Sciences, Institute of Public Finance, Helmut Schmidt University, Holstenhofweg 85, 22043, Hamburg, Germany
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Abstract: | This contribution provides a game theoretical derivation of market demand for status goods as a function of the level and distribution of income: if (1) the price is sufficiently low, everyone buys the good; if (2) the price is sufficiently high, only the rich buy the good (a status good in a narrow sense). If (3) the price is located in very high or in middle range, demand collapses. Thereby, 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. |
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