On the Causality and Cause of Returns to Organizational Status: Evidence from the grands crus classés of the Médoc
This paper addresses the recent debate about the causality of status effects and identifies the symbolic effect of status on the prices organizations charge for their products. I exploit the grand cru classification of the chateaux of the Médoc, created in 1855, as a fixed hierarchical symbol of class status. The classification cannot be reversely affected by the quality chateaux produce or the prices they charge, which greatly facilitates the estimation of the causal effect. To discern whether status serves as a signal of quality under uncertainty or satisfies the motive of conspicuous consumption, I study a period of time during which the uncertainty about quality has arguably declined. An instrumental variable and a matching estimator identify a symbolic effect of status on prices. The effect increases in a time of decreasing uncertainty, which supports the motive of conspicuous consumption as a driver of the effect. However, the results caution that we might commonly overestimate the symbolic value of status if we underestimate the disproportional value markets place on the pinnacle of quality, the enduring nature of reputation, and the effect of endogenous quality choices on status effect estimates.
Keywords: Status and Position;