This paper presents a model of fashion cycles based on the idea that individuals purchase fashion goods because their displayed status increases with the personal status of other consumers who buy the same good. The main point of the dynamic fashion model is that fashion cycles can arise without informational imperfections or upward sloping demand curves. Fashion cycles occur in the model because demand now is a rising function of future prices: if future prices are high, only rich consumers will buy it in the future and the good will have a higher status value in the future and will be more desirable now, even though demand now is a decreasing function of current price. Fashion firms can therefore have an implicit contract with their present consumers not to lower prices in the future.
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