Societal fear : portrait of a market failure

Abstract

Some entities, members of the Ideological Superstructure, have the power to influence consumers taste and behavior. In doing so, fear has proven to be a very efficient tool to achieve their profit-seeking goals. The purpose of the thesis is to study fear as a market economy determinant and byproduct. I will follow an inductive analysis in which in Chapter 2 I will part from the individual and study how we shape our reservation prices. This chapter will be based on Witte’s (1992) study on fear appeal theory and her Extended Parallel Processing Model and also on Caplin’s (2002). Later on Chapter 3 I will go into a broader scope and analyze the monopolist production decisions when faced with the power of shifting up demand with fear and its consequences on social welfare. Chapter 4 will analyze how competition on an oligopoly structure changes the overall picture. These last couple of chapters will present an extension of Dixit & Norman’s model (1978). I will try to show that even though fear is bare non ethereal information, it will have parallel effects as any corporeal pollutant and the problems aroused will be related in nature to the same type of market failures that are present on them.