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Weekly Economics Webinar by Kristof Madarasz

October 27 @ 1:30 pm - 2:40 pm

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Event Details

Title: Mimetic Dominance and the Economics of Exclusion [link to paper]

Speaker: Kristof Madarasz, Associate Professor, LSE

Abstract: We propose that a person’s valuation from consuming an object or possessing an attribute is increasing in others’ unmet excess desire for it. Such mimetic dominance-seeking helps explain a host of market anomalies and generates novel predictions in a variety of domains. In bilateral exchange, there is a reluctance to trade, and people exhibit a ‘social’ endowment effect. The value of consuming a good increases in its scarcity, which generates a motive for exclusion. Randomly excluding potential consumers from the opportunity to acquire a product will increase profits for a classic monopolist producing at zero marginal cost and a seller’s rents in first-price auctions. We test the predictions of the model empirically. When auctioning a private good, all else equal, randomly excluding people from the opportunity to bid substantially increases bids amongst those who retain this option. Exclusion leads to bigger gains in expected revenue than increasing competition through inclusion. Such effects are absent when those excluded are known to have lower valuations. In basic exchange, a person’s willingness to pay for a good increase substantially when others are excluded from the opportunity of buying the same kind of good. Mimetic preferences have implications for both non-price and price based methods of exclusion: the model generates ‘Veblen effects,’ rationalizes attitudes against redistribution, immigration, and trade, and provides a novel motive for social stratification and discrimination.

Details

Date:
October 27
Time:
1:30 pm - 2:40 pm

Organizer

Department of Economics
Website:
https://ashoka.edu.in/economics

Venue

Zoom Webinar
India + Google Map