Answer to Question #90850 in Microeconomics for uchia

Question

Why might leasing a new Porsche be a good investment for an aspiring Hollywood film producer, even if he can’t easily afford the monthly payments?

Answer 1

An aspiring Hollywood film producer leasing a new Porsche might be a good investment even if he can’t easily afford the monthly payments because of statistical discrimination. Statistical discrimination refers to a distinction which occurs between the demographic groups on the basis of imagined or real statistical distinctions between groups. In some cases, this discrimination is legal such as in insurance market while in some cases it is illegal such as in racial profiling and discrimination in labor market based on gender.

In simple words, statistical discrimination is where judgment is made about quality of goods, services or people based on characteristics of groups in which one belongs to. In the film industry, individuals are characterized to be rich and owned high-quality products including cars. Thus, for an aspiring film producer, it might be a good investment to lease a new Porsche because it would portray him as rich and fits the class or characteristics of the film producers. He would be able to easily attracts customers in the industry and increase his acceptability and future success in the industry.