Cloak or Flaunt? The Fashion Dilemma
Marketing Science, 2012

There exists a dichotomy in the communication strategies of fashion firms—some firms purposefully cloak information on the tastefulness of their products, whereas others openly flaunt their tasteful or “it” products. This divide in communication strategies cannot be explained by existing wealth signaling models of fashion.

In this paper, Assistant Professor Hema Yoganarasimhan offers a model of fashion that explains the above dichotomy by modeling fashion as a social device that plays the dual role of allowing people to both fit in with their peers and differentiate themselves by signaling their good taste or access to information.

In this context, the study shows that a fashion firm faces an interesting dilemma—if it restricts information, then only sophisticated consumers buy its products and use them to signal their taste. Cloaking thus preserves the signaling value of its products but reduces the number of social interactions enabled by them. In contrast, flaunting undermines the signaling value of its products but increases the interactions enabled by them. Given these trade-offs, Yoganarasimhan derives the conditions under which cloaking occurs. She also shows that, in equilibrium, the most tasteful product endogenously emerges as the fashion hit or “it” product.

Prof. Yoganarasimhan has presented this research at numerous institutions including Carnegie Mellon University, London Business School, New York University, the University of Florida, the University of Texas, Washington University St. Louis and Yale University.