Image concerns and the provision of quality

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: WZB Discussion Paper ; No. SP II 2013-211

Classification and Topics

• Classification: Wirtschaft ; Firm Behavior: Theory ; Asymmetric and Private Information; Mechanism Design ; Information and Product Quality; Standardization and Compatibility
• Subject: image motivation ; conspicuous consumption ; two-dimensional screening ; ethical consumption

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Friedrichsen, Jana
• Event: Veröffentlichung
• (who): Wissenschaftszentrum Berlin für Sozialforschung (WZB)
• (where): Berlin
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/90651
• Last update: 10.03.2025, 11:44 AM CET