Appendix 8A Cathedrals as Signaling and Entry Deterring Devices

We have, in this chapter, discussed with the use of anecdotal evidence, the opportunity cost of cathedral building. Whatever the costs—and they were substantial in some estimates—it is clear that medieval Catholicism emphasized extravagance and grandeur over the far simpler architectural forms of later Protestantism. In this appendix we attempt to shed light on the economic role of cathedrals in the market for religion. We argue that Protestant entry was not simply the result of mistakes by the Catholic Church, which, as well as being untestable theory, suggests that they did not employ rational methods to prevent Protestants and heretics of various kinds from entering the market. Rather the Church anticipated entry and was able to prevent it in certain parts of Europe—those areas where success was most promising. First we present a brief review of the economic role of the cathedral. Next we consider the possibility that cathedral building may have been an example of limit pricing (an artificially low price to deter entry) in the market for Christian religion— a strategy that had both retarded entry in general and impeded it over large areas of Europe. We argue, finally, with preliminary statistical support, that some facts conform to the limit-pricing hypothesis.

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