Superiority-seeking and the preference for exclusion

Imas, Alex and Madarász, Kristóf ORCID: 0009-0008-8053-3937 (2024) Superiority-seeking and the preference for exclusion. Review of Economic Studies, 91 (4). 2347 – 2386. ISSN 0034-6527

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Abstract

We propose that a person's desire to consume an object or possess an attribute increases in how much others want but cannot have it. We term this motive imitative superiority-seeking and show that it generates preferences for exclusion that help explain a host of market anomalies and make novel predictions in a variety of domains. In bilateral exchange, trade becomes more zero-sum, leading to an endowment effect. People's value of consuming a good increases in its scarcity, which generates a motive for firms and organizations to engage in exclusionary policies. A monopolist producing at constant marginal cost can increase profits by randomly excluding buyers relative to the standard optimal mechanism of posting a common price. In the context of auctions, a seller can extract greater revenues by randomly barring a subset of consumers from bidding. Moreover, such non-price-based exclusion leads to higher revenues than the classic optimal sales mechanism. A series of experiments provides direct support for these predictions. In basic exchange, a person's willingness to pay for a good increases as more people are explicitly barred from the opportunity to acquire it. In auctions, randomly excluding people from the opportunity to bid substantially increases bids amongst those who retain this option. Consistent with our predictions, exclusion leads to bigger gains in expected revenue than increasing competition through inclusion. Our model of superiority-seeking generates "Veblen effects,"rationalizes attitudes against redistribution and provides a novel motive for social exclusion and discrimination.

Item Type:	Article
Official URL:	https://academic.oup.com/restud
Additional Information:	© 2023 The Author(s)
Divisions:	Management
Subjects:	H Social Sciences > HB Economic Theory
JEL classification:	D - Microeconomics > D9 - Intertemporal Choice and Growth > D90 - General D - Microeconomics > D4 - Market Structure and Pricing > D40 - General C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C90 - General P - Economic Systems > P0 - General > P00 - General
Date Deposited:	12 Sep 2023 16:00
Last Modified:	04 Nov 2024 03:00
URI:	http://eprints.lse.ac.uk/id/eprint/120207

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