Excess Demand and Rationing: Selling to an Input
AbstractThis paper develops a model that explains the persistence of excess demand for some goods. It offers that, for some goods, consumers care about who else is consuming the good. As such, their willingness to pay depends on their beliefs about the other consumers. We demonstrate that screening mechanisms that impose costs in negative correlation to an individual's (positive) externality can increase profits while appearing to generate excess demand. We feel that such a model is appropriate in that casual observation seems to indicate that it does well in predicting which goods would use such a screening mechanism and which would not.
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Bibliographic InfoPaper provided by Department of Economics, Simon Fraser University in its series Discussion Papers with number dp07-11.
Date of creation: Jun 2007
Date of revision:
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Postal: Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, Canada
Web page: http://www.sfu.ca/economics.html
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Postal: Working Paper Coordinator, Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, Canada
Find related papers by JEL classification:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-06-18 (All new papers)
- NEP-LAW-2007-06-18 (Law & Economics)
- NEP-MKT-2007-06-18 (Marketing)
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