Demand with Consumption Externalities
AbstractThis paper studies stability and slope properties of market demand when disaggregated consumption externalities exist. Equilibrium is stable when feedback effects are limited, where feedback effects exist when own demand is indirectly affected by own consumption. Market demand is downward sloping if consumption externalities are not too strong and negative consumption externalities are not too varied. Under purely positive consumption externalities market demand is downward sloping in any stable equilibrium. Demand may be stable and upward sloping when negative consumption externalities exist. Under purely negative consumption externalities, upward sloping demand requires at least one "spoiler" whose consumption has a cumulatively large negative effect on others' demand.
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Bibliographic InfoPaper provided by Towson University, Department of Economics in its series Working Papers with number 2014-02.
Length: 32 pages
Date of creation: Apr 2014
Date of revision: Apr 2014
Demand; consumption externalities; bandwagon and snob effects; network effects; strategic complements and substitutes; interdependent preferences; congestion; feedback effects; stability; slope of market demand; moderate social influence.;
Find related papers by JEL classification:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-04-11 (All new papers)
- NEP-GER-2014-04-11 (German Papers)
- NEP-URE-2014-04-11 (Urban & Real Estate Economics)
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