Image concerns and the provision of quality

Jana Friedrichsen

Discussion Papers, Research Unit: Market Behavior from WZB Berlin Social Science Center

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.

Keywords: image motivation; conspicuous consumption; two-dimensional screening; ethical consumption (search for similar items in EconPapers)
JEL-codes: D21 D82 L15 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-com and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Image Concerns and the Provision of Quality (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:wzbmbh:spii2013211

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