What price makes a good a status good? Results from a mating game

This contribution provides a game theoretical derivation of market demand for status goods as a function of the level and distribution of income: if (1) the price is sufficiently low, everyone buys the good; if (2) the price is sufficiently high, only the rich buy the good (a status good in a narrow sense). If (3) the price is located in very high or in middle range, demand collapses. Thereby, we explain the critical price from which a status good acts as a distinctive signal. In addition, this approach shows the potential welfare-improving impact of conspicuous consumption. Copyright Springer Science+Business Media, LLC 2013