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Learning-by-Consuming and the Dynamics of the Demand and Prices of Cultural Goods

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  • Paulo Brito

    ()

  • Carlos Barros

    ()

Abstract

The major distinctive feature of cultural goods is that consumers must learn how to consume them, implying that preferences should be modelled as intertemporally dependent. The canonical model in the literature uses a habit formation analogy. In this paper, we discuss in detail, though in the simplest setup, a consistent preference structure for that model. Then, we derive the implications for the dynamics of two aggregate equilibrium models, a fixed price model and a flexible price model. The learning-by-consuming behaviour is characterised by a preference structure displaying bounded adjacent complementarity in the demand for the cultural good. This implies that there will be short run complementarity between the stocks of culture and financial wealth and that the adjustment of the demand for cultural goods, or of their relative price, will have some inertia. In the exogenous price model, we find that increases in income will raise the long run demand for cultural goods while increases in the relative price will decrease it. In the endogenous price model, an increase in the supply of cultural goods will imply an initial undershooting of the price of cultural goods followed by an upward transition process. Our results seem to be consistent with the empirical results on the demand for cultural goods and seem to offer an explanation for the Baumol and Bowen paradox. Copyright Springer Science + Business Media, Inc. 2005

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Bibliographic Info

Article provided by Springer in its journal Journal of Cultural Economics.

Volume (Year): 29 (2005)
Issue (Month): 2 (May)
Pages: 83-106

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Handle: RePEc:kap:jculte:v:29:y:2005:i:2:p:83-106

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Web page: http://www.springerlink.com/link.asp?id=100284

Related research

Keywords: cultural goods; dynamics of demand; dynamics of prices; intertemporally dependent preferences;

References

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  1. Gerard-Varet, Louis-Andre, 1995. "On pricing the priceless: Comments on the economics of the visual art market," European Economic Review, Elsevier, vol. 39(3-4), pages 509-518, April.
  2. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  3. Gary S. Becker & Kevin M. Murphy, 1986. "A Theory of Rational Addiction," University of Chicago - George G. Stigler Center for Study of Economy and State 41, Chicago - Center for Study of Economy and State.
  4. Ryder, Harl E, Jr & Heal, Geoffrey M, 1973. "Optimum Growth with Intertemporally Dependent Preferences," Review of Economic Studies, Wiley Blackwell, vol. 40(1), pages 1-33, January.
  5. Christopher D Carroll & Jody Overland & David N Weil, 1997. "Comparison Utility in a Growth Model," Economics Working Paper Archive 387, The Johns Hopkins University,Department of Economics.
  6. Christopher D Carroll, 2000. "Solving Consumption Models with Multiplicative Habits," Economics Working Paper Archive 421, The Johns Hopkins University,Department of Economics.
  7. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, vol. 67(2), pages 76-90, March.
  8. Wan, Henry, 1970. "Optimal Saving Programs under Intertemporally Dependent Preferences," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 11(3), pages 521-47, October.
  9. Throsby, David, 1994. "The Production and Consumption of the Arts: A View of Cultural Economics," Journal of Economic Literature, American Economic Association, vol. 32(1), pages 1-29, March.
  10. Mansoorian, Arman, 1993. "Habit persistence and the Harberger-Laursen-Metzler effect in an infinite horizon model," Journal of International Economics, Elsevier, vol. 34(1-2), pages 153-166, February.
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Cited by:
  1. Nadia Campaniello & Matteo Richiardi, 2011. "Beggar-thy-neighbor in Art Consumption: Evidence from the “Bel Paese”," LABORatorio R. Revelli Working Papers Series 116, LABORatorio R. Revelli, Centre for Employment Studies.
  2. Guerzoni, Marco & Nuccio, Massimiliano, 2012. "Music consumption at the dawn of the music industry: the rise of a cultural fad," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 201217, University of Turin.
  3. Affortunato Francesca & Castagna Alina & Crociata Alessandro & D'Angelo Francesca, 2010. "Evaluating The Culture-Led Regeneration," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 1062-1066, December.
  4. repec:ise:isegwp:wp142008 is not listed on IDEAS
  5. Marco Guerzoni & Massimiliano Nuccio, 2014. "Music consumption at the dawn of the music industry: the rise of a cultural fad," Journal of Cultural Economics, Springer, vol. 38(2), pages 145-171, May.
  6. Sangho KIM & Donghyun PARK, 2010. "Addictive behavior in cinema demand: evidence from Korea," Economic Growth centre Working Paper Series 1002, Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre.
  7. Marco Alderighi & Eleonora Lorenzini, 2012. "Cultural goods, cultivation of taste, satisfaction and increasing marginal utility during vacations," Journal of Cultural Economics, Springer, vol. 36(1), pages 1-26, February.
  8. Peter Earl & Jason Potts, 2013. "The creative instability hypothesis," Journal of Cultural Economics, Springer, vol. 37(2), pages 153-173, May.

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