Why do consumers willingly pay more for brand name products compared to non-branded products even though the two have the same attributes. This doctoral dissertation research in economics (DDRIE) research project will use economic theory and experimental methods to investigate the social network source of value for a product. The researchers argue that people pay more for a product to signal prestige or because people they look up to consume that product. The researchers will collect data on a number imported and domestically produced consumer goods to test this theory. The results of this social learning approach to product value has important policy implications: it could help businesses to market their products both domestically and abroad. Second, by helping to disentangle social interaction sources of value from the social learning source, it provides a guide to producers in targeting their products effectively. The results of this research therefore contributes to economic growth, increased employment, and improves the wellbeing of Americans.
This project uses an experimental game to study how social interactions affect consumers? perception of the value of goods they buy. The proposal develops an endogenous network-dependent definition of product quality based on social network signaling and social learning and develops a model to explain this social signaling value determination. The main hypothesis is that the demand for a product is partly determined by the consumer?s desire to signal status or because the product is consumed by aspirational peers. The researchers will then use both survey and experimental methods to test this hypothesis on a set of goods. The results of this innovative DDRIE make significant contributions to the IO, development economics, and trade literatures as well as point the way for researchers to seriously consider social signaling when modeling the demand. The result of the project will help researchers distinguish social leaning from shared utility and social signaling. The results of this research project has policy implications for both consumers and producers.
