Misery loves company: social influence and the supply/pricing decision of a popular restaurant
AbstractIn a model with social influence, Becker (1991) offers an explanation for why popular restaurants with excess demand do not raise their prices. He also offers an explanation for why such restaurants do not increase supply but admits his explanation may be weak. Becker does not provide a formal analysis of why supply is not increased. In this paper, I present a formal analysis of Becker's argument based on a different kind of social influence. I also offer an alternative explanation of why some restaurants are popular and others are not. Finally, while Becker (1991) includes market demand and the gap between market demand and supply as separate arguements in the customers' demand function to explan why supply and price are not increased. I only include the gap between demand and supply in the customers' utility function to explain both puzzles.
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Bibliographic InfoPaper provided by Department of Economics, Simon Fraser University in its series Discussion Papers with number dp00-18.
Length: 23 pages
Date of creation: 2000
Date of revision: 14 Sep 2000
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Postal: Working Paper Coordinator, Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, Canada
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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