Standard result of self-selection model - no distortion at the quality of the product supplied to the presons with highest preference while the quality of other products is distorted to lower level-comes from the assumption that comsumers are so rational that they can estimate the value of the products exactly by their quality. In fact, as Veblen said, consumers are not so rational, their consumption behavior are affected by their social position and psychological state for example satisfaction of vanity or saving his face. So in this study, considering this fact in self-selection model, I investigate the change of the results of the standard self-selection model.
The results are different. If the satisfaction of vanity of the persons with lower preference is very important, monopolist focuses on the all cosumers's incentive to consume goods supplied to other groups So quality of goods supplied to the lower more is degraded but quality to the upper is enhanced. If the persons with high preference greatly unsatisfy with consuming same goods with other persons, then efforts to segment market are not needed. So there exists no distortions. If both are important, monopolist focuses on the incentive of the presons with lower preference. so quality to the lower is not distorted but quality to the upper is enhenced.
