A social-status rationale for repugnant market transactions

Abstract

AbstractIndividuals often deem market transactions in sex, human organs and surrogacy, among others, repugnant. Repugnance norms can be explained by appealing to social-status concerns. We study an exchange economy in which agents abhor consumption dominance: one’s social status is compromised if one consumes less of every good than someone else does. Dominance may be forestalled by partitioning goods into submarkets and then invoking the repugnance norms that proscribe trade across these submarkets. Dominance may also be forestalled if individuals strategically ‘overconsume’ some goods, interpreted as emergent status goods. When equilibria are multiple, there is scope for welfare-enhancing policies that coordinate on status goods.