On limiting the market for status signals
TL;DR: In this paper, the impacts of tax policy and benefits on the signalling equilibrium are considered, and the benefits of a Pareto-improving tax policy are discussed. But the authors do not consider the impact of tax on the signaling equilibrium.
About: This article is published in Journal of Public Economics.The article was published on 1994-01-01 and is currently open access. It has received 265 citations till now. The article focuses on the topics: Tax policy & Inefficiency.
Citations
More filters
TL;DR: In this article, the authors examined the effects of brand identity cues and drew attention to the trade-offs consumers make when choosing between original brands and copycats offering superior product features.
Abstract: Purpose
Copycat brands offering improved product quality pose serious challenges to original brands. This paper aims to provide a better understanding of why consumers prefer copycat brands with superior product attributes and how original brands can shift this preference back by strategically leveraging brand identity cues.
Design/methodology/approach
Four experimental studies test different types of brand identity cues that original brands can use to influence consumer preferences. Logistic and linear regression analyses analyze the effects.
Findings
The results systematically show the power of brand identity cues in helping original brands reduce share loss to copycat brands using superior product attributes. They also reveal the role of brand equity, conspicuous consumption and consumers’ tendency of using brands as status symbols in enhancing the effect of brand identity cues in the face of superior copycats.
Research limitations/implications
This paper extends cue diagnosticity theory and the brand identity literature by showing the power of brand identity cues in predicting consumer choices of original brands.
Practical implications
This paper provides useful guidelines for managers of original brands on how to effectively use brand identity cues to compete against copycats.
Originality/value
Prior research focuses on how copycat brands’ characteristics influence consumers’ evaluations of copycats. These studies are limited, however, by their focus on cheap and low-quality copycats. The current paper examines the effects of brand identity cues and draws attention to the trade-offs consumers make when choosing between original brands and copycats offering superior product features.
8 citations
TL;DR: The authors investigated the desirability of income taxes when the objective is to mitigate wasteful conspicuous consumption generated by people's status-seeking behavior and found that inequality and taxation can be complements, although the relationship is in general non-monotonic.
Abstract: The authors investigate the desirability of income taxes when the objective is to mitigate wasteful conspicuous consumption generated by people's status-seeking behavior. They consider the joint role of pre-tax wage inequality and of social norms determining how social status is assigned. They find that when social status is ordinal (i.e., only one's rank in the income distribution matters) inequality and taxation are substitutes. Instead, when status is cardinal (i.e., also the shape of the income distribution matters) inequality and taxation can be complements, although the relationship is in general non-monotonic. This is because the value of social status is endogenous, potentially giving rise to a perverse self-reinforcing mechanism where more waste in conspicuous consumption induces a greater competition for status and viceversa.
7 citations
Posted Content•
TL;DR: In this article, the authors present an equilibre avec signal avec separation complete des contributions and efficacite des choix de contribuer sous forme de travail ou de cotisation.
Abstract: Les membres d'un club informel contribuent a la production de bien public qui leur confere du prestige. Leur contribution a cette production prend la forme d'une cotisation ou de travail. On montre qu'il existe un equilibre avec signal avec separation complete des contributions et efficacite des choix de contribuer sous forme de travail ou de cotisation. Il n'existe pas de relation reguliere entre la quantite de bien publicoptimale et celle produite. La quantite effectivement produite est cependant superieure a celle qui serait produite dans un equilibre de Nash ou les joueurs ne prennent pas en compte leur reputation.
7 citations
TL;DR: In this paper, a selective survey of recent advances in the economic analysis of the origins and consequences of social status is provided, and the consequences of preferences for status are studied for a variety of problems and settings.
Abstract: Social distinction or status is an important motivation of human behaviour. This paper provides a selective survey of recent advances in the economic analysis of the origins and consequences of social status. First, a selection of empirical research from a variety of scientific disciplines is discussed to underpin the further theoretical analysis. I then consider the origins and determinants of tastes for status, discuss the endogenous derivation of such a preferences for relative standing and assess the different formalisations these preferences. Subsequently, the consequences of preferences for status are studied for a variety of problems and settings. The last section discusses a number of implications of status concerns for normative economics and public policy.
7 citations
TL;DR: In this paper, the authors build a theoretical model of food consumption decisions that accounts for social influence and find that a high degree of conformism to the social norm could explain the obesity epidemic.
Abstract: This paper contributes to explaining the obesity epidemic and finding a potential remedy. We build a theoretical model of food consumption decisions that accounts for social influence. In our model, individuals’ rationality is affected by an endogenous social weight norm, which influences their calorie consciousness and perceived survival chances. Individuals are conformist, and the degree of conformism describes the extent to which individuals’ discounted utility is influenced by the social weight norm. With an endogenous social weight norm reflecting a heavier and heavier average body weight, we show that a high degree of conformism to the social norm could explain the obesity epidemic. In this environment, a government intervention decreasing energy density is ineffective at reducing steady-state body weight. This result could explain why this type of government dietary intervention seems to have had no effect on obesity, and suggests that the same type of intervention through the Food Stamps Program would be ineffective on its own. We also find that in the steady state, individuals can be overweight or underweight depending on their degree of conformism relative to the education they receive about the healthy weight. While education programs focusing on either diet or exercise have had moderate success, we show that focusing on healthy weight education could combat social influence and reduce obesity.
7 citations
References
More filters
Posted Content•
TL;DR: In this paper, the authors model the negative self-characterizations of welfare recipients as a form of social stigma, and use a utility maximization model to predict the impact of welfare programs on the low-income population.
Abstract: Perhaps the most basic assumption of the economic theory of consumer demand is that "more is better than less." Virtually all of the major propositions of consumer theory can, in a certain sense, be derived from the assumption that "goods are good." Interestingly, however, this tenet seems to be violated by the behavior of many individuals in the low-income population, for many turn out to be eligible for a positive welfare benefit but do not in fact join the welfare rolls. For example, it has been estimated that in 1970, only about 69 percent of the families eligible for AFDC (Aid to Families with Dependent Children) participated in the program (see Richard Michel, 1980). The corresponding percentage for AFDC-U, the program for which families with an unemployed male are eligible, was only 43 percent and the participation rate in the Food Stamp Program was only 38 percent (see Maurice McDonald, 1977). This phenomenon has puzzled many investigators because such individuals do not locate on the boundaries of their budget sets. Consequently, most investigators ignore the problem when studying the effects of welfare programs on behavior. In this paper, this seemingly irrational rejection of an increase in income is modeled as resulting from welfare stigma -that is, from disutility arising from participation in a welfare program per se.1 The existence of stigma has been amply documented in the sociological literature (Patrick Horan and Patricia Austin, 1974; Lee Rainwater, 1979), where interviews of recipients have often uncovered feelings of lack of self-respect and " negative self-characterizations" from participation in welfare. Nevertheless, this phenomenon has not been modeled, and many questions consequently remain. When is the disutility of participation strong enough to prevent participation? Shouldn't we expect individuals to weigh the disutility of participation against the potential benefit in their decisions? What is the elasticity of participation with respect to the potential benefit? Also, in a slightly different vein, how are the work disincentives of welfare affected by stigma? These questions have been given scant attention by economists, yet they are crucial for our ability to predict the impact of various welfare programs on the lowincome population. Here these questions are addressed by modeling nonparticipation as a utility-maximizing decision. The model is developed and estimated for the AFDC program.2 The model posits an individual utility function containing not just disposable income, but
1,195 citations
Posted Content•
881 citations
Posted Content•
TL;DR: In this paper, the authors examine a variety of empirical evidence that relates to this proposition about the firm's internal wage structure and conclude that the competitive wage structure within a firm must be one in which individual wage differences understate individual differences in marginal products.
Abstract: Status is, like Coase's social costs, a reciprocal phenomenon. Given that one person's gain in status can occur only at the expense of a loss in status for others, and that workers are free to choose their coworkers, it follows that the competitive wage structure within a firm must be one in which individual wage differences understate individual differences in marginal products.' The purpose of this paper is to examine a variety of empirical evidence that relates to this proposition about the firm's internal wage structure. The paper is organized as follows. Section I briefly summarizes the theoretical considerations that govern competitive wage determination when status matters to people and firms are viewed as voluntary associations of workers. Section II then confronts the predictions of Section I by examining pay and productivity schedules for a group of sales occupations for which these schedules are relatively easily observed. Section II also examines the relationship between wages and productivity for a sample of university professors, an occupation in which individual productivity differences are, for a variety of obvious reasons, relatively more difficult to measure. All of the evidence examined is consistent with the hypothesis that, within firms, wage rates vary substantially less than do individual productivity values. Section III discusses additional observations and evidence that bear on this same hypothesis. It suggests that the implicit market for status may strongly influence the ways in which firms are organized to carry out the tasks they perform. Section IV concludes by considering the claim that egalitarian internal wage structures arise because of "equity considerations." It argues that the concept of equity appears very closely linked to the concept of status, and suggests a strategy for assigning monetaty value to the equity considerations that so often dominate public policy decisions.
436 citations
Posted Content•
370 citations
Posted Content•
354 citations