Design Innovation and Fashion Cycles
AbstractA model of fashion cycles is developed in which fashion is used as a signalling device in a "dating-game". We assume that there is a designer (monopolist) who can create new designs at a positive fixed cost and zero marginal cost. Designs are durable commodities. We show the existence of equilibria of the following form: Every T periods a new design is innovated. Over time the price of the design falls and it spreads to more and more agents. Once sufficiently many agents own the design it is profitable to create a new design and a new fashion cycle begins. We also examine the case when there is competition among potential deisigners and show that there are equilibria in which fashion changes less frequent and the price of fashion remains bounded above the corresponding price in the monopoly case.
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Bibliographic InfoPaper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1049.
Date of creation: May 1993
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Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014
Web page: http://www.kellogg.northwestern.edu/research/math/
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