We analyzed the market for indivisible, pure status goods. Firms produce and sell di¤erent brands of pure status goods to a population that is willing to signal individual abilities to potential matches in another population. Individual status is determined by the most expensive status good one has. There is a strati…ed equilibrium with a …nite number of brands. Under constant tax rates, a monopoly sells di¤erent brands to social classes of equal measure, while in contestable markets, social classes have decreasing measures. Under optimal taxation, contestable markets have progressive tax rates, while a monopoly faces an adequate ‡at tax rate to all brands. In contrast with the literature, subsidies may be socially optimal, depending on the parameters, in both market structures.
We analyze a static game of public good contributions where finitely many anonymous players have heterogeneous preferences about the public good and heterogeneous beliefs about the distribution of preferences. In the unique symmetric equilibrium, the only individuals who make positive contributions are those who most value the public good and who are also the most pessimistic; that is, according to their beliefs, the proportion of players who most like the public good is smaller than it would be according to any other possible belief. We predict whether the aggregate contribution is larger or smaller than it would be in an analogous game with complete information and heterogeneous preferences, by comparing the beliefs of contributors with the true distribution of preferences. A trade‐off between preferences and beliefs arises if there is no individual who simultaneously has the highest preference type and the most pessimistic belief. In this case, there is a symmetric equilibrium, and multiple symmetric equilibria occur only if there are more than two preference types.
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