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Some Anomalies Arising from Bandwagons that Impart Upward-Sloping Segments to Market Demand

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Author Info
Micha Gisser (Department of Economics, University of New Mexico)
James E. McClure () (Department of Economics, Ball State University)
Giray Ökten () (Department of Mathematics, Florida State University)
Gary Santoni () (Department of Economics, Ball State University)

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Abstract

In Gary Becker’s (1991) theory of bandwagon effects, a portion of market demand is positively sloped. In this, he ignores Harvey Leibenstein’s (1950) hypothesis that market demands for bandwagon goods are everywhere negatively sloped (stemming from scarcity imposed constraints). A substantial literature now invokes Becker’s bandwagon, also ignoring Leibenstein. Two anomalies attend Becker’s bandwagon demand when it slopes upward: 1) straightforward parameterizations are inconsistent with the economic requirement that quantities demanded be non-negative; 2) regardless of parameterization, the comparative statics of Becker’s demand carry unworldly implications.

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File URL: http://web.bsu.edu/cob/econ/research/papers/bsuecwp200804gisser.pdf
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File Function: First version, 2008
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Publisher Info
Paper provided by Ball State University, Department of Economics in its series Working Papers with number 200804.

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Length: 17 pages
Date of creation: Dec 2008
Date of revision: Dec 2008
Handle: RePEc:bsu:wpaper:200804

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Related research
Keywords: Bandwagon Effect; Law of Demand;

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Find related papers by JEL classification:
D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
D40 - Microeconomics - - Market Structure and Pricing - - - General
D62 - Microeconomics - - Welfare Economics - - - Externalities

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  1. Gary S. Becker, 1974. "A Theory of Social Interactions," NBER Working Papers 0042, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Karni, Edi & Levin, Dan, 1994. "Social Attributes and Strategic Equilibrium: A Restaurant Pricing Game," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 822-40, August. [Downloadable!] (restricted)
  3. Becker, Gary S, 1991. "A Note on Restaurant Pricing and Other Examples of Social Influences on Price," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1109-16, October. [Downloadable!] (restricted)
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  4. Corneo, Giacomo & Jeanne, Olivier, 1997. "Conspicuous consumption, snobbism and conformism," Journal of Public Economics, Elsevier, vol. 66(1), pages 55-71, October. [Downloadable!] (restricted)
  5. Stiglitz, Joseph E, 1987. "The Causes and Consequences of the Dependence of Quality on Price," Journal of Economic Literature, American Economic Association, vol. 25(1), pages 1-48, March. [Downloadable!] (restricted)
  6. Wolfgang Pesendorfer, 1993. "Design Innovation and Fashion Cycles," Discussion Papers 1049, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  7. Biddle, Jeff, 1991. "A Bandwagon Effect in Personalized License Plates?," Economic Inquiry, Oxford University Press, vol. 29(2), pages 375-88, April.
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