Equilibrium Play in Large Group Market Entry Games
Management Science
Brand image and brand dilution in the fashion industry
Automatica (Journal of IFAC)
Limited Edition Products: When and When Not to Offer Them
Marketing Science
Marketing Science
Numerical solution of a conspicuous consumption model with constant control delay
Automatica (Journal of IFAC)
The Benefit of Uniform Price for Branded Variants
Marketing Science
A Model of the “It” Products in Fashion
Marketing Science
Differentiate or Imitate? The Role of Context-Dependent Preferences
Marketing Science
Conspicuous Consumption and Dynamic Pricing
Marketing Science
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Consumers purchase conspicuous goods to satisfy not only material needs but also social needs such as prestige. In an attempt to meet these social needs, producers of conspicuous goods like cars, perfumes, and watches, highlight the exclusivity of their products. In this paper, we propose a monopoly model of conspicuous consumption using the rational expectations framework, and then examine how purchase decisions are affected by the desire for exclusivity and conformity. We show that snobs can have an upward-sloping demand curve but only in the presence of consumers who are (weakly) followers. Laboratory tests lend support for this model prediction and for the rational expectations framework. The experimental results suggest that subjects used some degree of sophisticated thinking to arrive at their first-period decisions. Their behavior in the subsequent trials, however, can be adequately captured by a purely adaptive learning mechanism. We discuss the implications of consumer learning for optimal dynamic pricing policy by a monopolist.