How Human Psychology Explains Exclusive Brands and Exclusionary Policies
- January 13, 2021
- CBR - Behavioral Science
The idea of exclusivity has long been used to jack up prices on luxury cars, liquors, and fashion, but exactly how much do people value exclusive goods? Enough to pay a premium of 50 percent or more, according to Chicago Booth’s Alex Imas and London School of Economics’ Kristóf Madarász. The reason reflects a deep-seated aspect of human nature: we put greater value on things that other people want but can’t have, just because they can’t have them.
“It isn’t intentional meanness,” Imas says. “It’s more subconscious. The desire to possess something that others want exclusively is a great passion of human nature.”
Related ideas on a quest for dominance and superiority have been around for centuries in the writings of philosophers and religious leaders including Augustine of Hippo, Thomas Hobbes, Jean-Jacques Rousseau, and Martin Luther King Jr. Traditional economic models, however, have yet to consider such motives as driving important aspects of both individual behavior and markets. So Imas and Madarász developed a theoretical framework and conducted two experiments involving almost 400 participants to explore the impact and value of exclusion and exclusivity.
The findings could have broad implications not only for marketing products but also for explaining exclusionary policies by businesses and governments aiming to exploit the psychology of dominance seeking. The motive they identify can potentially rationalize political attitudes on redistribution, immigration, and trade, and may also help explain part of the recent tide of nationalism swamping global politics.
The researchers suggest that the quest for superiority through exclusion, which they call “mimetic dominance-seeking,” may potentially be a fundamental psychological force. Mimetic basically means “imitative” or “reflective”; building on the late literary scholar René Girard’s theory that human desires are inherently reflective or imitative of the desires of others, the researchers suggest that “mimetic desires” give way to conflict and result in a fight for dominance. They argue that a person’s desire for something is a reflection of how much others want it and how many of them can’t have it.
The findings may help explain some situations that vex economists and political scientists.
For the first experiment, the researchers employed 274 participants who’d just taken part in an unrelated study for which they were paid $15. The participants were told they could bid as much as $15 in an auction for a custom T-shirt created exclusively for the study. Imas and Madarász split the participants into three groups. In one, a certain number were randomly excluded. In another, they were permitted to bid only if they signaled they wanted the T-shirt. In the third group, anyone could bid.
Average bids were highest in the random-exclusion group, the researchers find, supporting the theory that the perception of exclusivity—that some people who wanted it couldn’t have it—elevated the subjects’ desire for the T-shirt.
In a second experiment involving 95 similar participants, the researchers created two groups. In the first, everyone wrote down how much they’d be willing to pay for the T-shirt, and those who bid more than a certain price were allowed to buy it. In the other group, some participants were randomly excluded, and the remainder wrote down how much they’d be willing to pay. The median bid in the random-exclusion group was $5, twice the median in the first group, the researchers find.
“These results provide direct support for the role of mimetic dominance in private valuations,” they write. “People significantly increase their willingness to pay for a good if they know that there are others whose intrinsic tastes for the good may well be in excess of theirs, but . . . they cannot obtain the good.”
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The findings may help explain some situations that vex economists and political scientists, the researchers suggest. For example, the mimetic dominance motive can explain the seemingly puzzling tendency of some companies to artificially restrict supply in the face of surging demand. In these cases, exclusion may be a feature rather than a bug—increasing supply would eliminate the gratification people get from knowing that others want what they have but cannot get it, which would decrease their valuation of the product and eat into profits.
Imas and Madarász also point to research from Princeton’s Ilyana Kuziemko, Harvard’s Ryan W. Buell and Michael I. Norton, and Yale’s Taly Reich that finds some of the fiercest opposition to raising the American minimum wage comes from people earning just over the minimum. The mimetic-dominance finding indicates that this could be because higher pay for those at the bottom would eliminate the advantage that the next-lowest group perceives having, Imas and Madarász write.
“A policy which sustains exclusion and inequality may be more popular than a redistributive policy even for those who would gain materially from greater social insurance because it may lead to a loss of mimetic dominance,” they write. They argue that this idea also applies to policies on immigration, economic nationalism, and barriers to trade.
“Our model helps explain a host of market anomalies and generates novel predictions for competition and political economy,” Imas and Madarász write. “The framework provides a novel motive for attitudes against redistribution and immigration, as well as points to a novel psychological motive for inter-group discrimination.”
- Alex Imas and Kristóf Madarász, "Mimetic Dominance and the Economics of Exclusion: Private Goods in Public Context," Working paper, July 2020.
- Ilyana Kuziemko, Ryan W. Buell, Taly Reich, and Michael I. Norton, "Last-Place Aversion: Evidence and Redistributive Implications," Quarterly Journal of Economics, February 2014.
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