January, 2022

Communicating identity

How the symbolic meaning of goods creates different market types
  • Erwin Dekker

    Senior Fellow, F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics
  • Carolina Dalla Chiesa

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This paper argues that the different symbolic meanings of goods give rise to three institutionally different market types. We start from the realization that consumption has symbolic meaning, which individuals use to communicate and construct their identity to their social networks. We argue that firm behavior (including size, pricing and marketing strategies) must be congruent with the symbolic meaning of goods. We distinguish between two stylized meanings of goods, status and taste, which we derive from the socio-anthropological literature on consumption. We argue that these different meanings, articulated by consumers to communicate their identity, give rise to three ideal-typical market types. We present the institutional differences between these market types as well as the implications for firm behavior and demonstrate how firm behavior and marketing strategies differs significantly from markets in which the symbolic meaning of goods is relatively unimportant. We use the recent transformation of the beer market by the craft-beer producers, to illustrate our theory.