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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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)
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.:
- U. Horst & Jose A. Scheinkman, 2010.
"Equilibria in Systems of Social Interactions,"
Levine's Working Paper Archive
506439000000000119, David K. Levine.
- Andrew Postlewaite, .
"The Social Basis of Interdependent Preferences,"
Penn CARESS Working Papers
6bd000503382ae2f0b90d25e3, Penn Economics Department.
- Ed Hopkins & Tatiana Kornienko, 2004.
"Running to Keep in the Same Place: Consumer Choice as a Game of Status,"
ESE Discussion Papers
92, Edinburgh School of Economics, University of Edinburgh.
- Ed Hopkins & Tatiana Kornienko, 2004. "Running to Keep in the Same Place: Consumer Choice as a Game of Status," American Economic Review, American Economic Association, vol. 94(4), pages 1085-1107, September.
- Jeffrey Rohlfs, 1974. "A Theory of Interdependent Demand for a Communications Service," Bell Journal of Economics, The RAND Corporation, vol. 5(1), pages 16-37, Spring.
- Micha Gisser & James E. McClure & Giray Ökten & Gary Santoni, 2008.
"Some Anomalies Arising from Bandwagons that Impart Upward-Sloping Segments to Market Demand,"
200804, Ball State University, Department of Economics, revised Dec 2008.
- Micha Gisser & James E. McClure & Giray Okten & Gary Santoni, 2009. "Some Anomalies Arising from Bandwagons that Impart Upward Sloping Segments to Market Demand," Econ Journal Watch, Econ Journal Watch, vol. 6(1), pages 21-34, January.
- Deb, Rahul, 2009. "A testable model of consumption with externalities," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1804-1816, July.
- Gary S. Becker & Kevin M. Murphy & Ivan Werning, 2005. "The Equilibrium Distribution of Income and the Market for Status," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 282-310, April.
- Finn Christensen & Juergen Jung, 2010.
"Global Social Interactions with Sequential Binary Decisions: The Case of Marriage, Divorce, and Stigma,"
2010-01, Towson University, Department of Economics, revised Jan 2010.
- Christensen Finn & Jung Juergen, 2010. "Global Social Interactions with Sequential Binary Decisions: The Case of Marriage, Divorce, and Stigma," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-37, October.
- Karp, Larry & Lee, In Ho & Mason, Robin, 2003.
"A global game with strategic substitutes and complements,"
CUDARE Working Paper Series
940, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
- Karp, Larry & Lee, In Ho & Mason, Robin, 2007. "A global game with strategic substitutes and complements," Games and Economic Behavior, Elsevier, vol. 60(1), pages 155-175, July.
- Karp, Larry & Lee, In Ho & Mason, Robin, 2003. "A global game with strategic substitutes and complements," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt09h2490x, Department of Agricultural & Resource Economics, UC Berkeley.
- Charles R. Plott & Jared Smith, 1999. "Instability of Equilibria in Experimental Markets: Upward-Sloping Demands, Externalities, and Fad-Like Incentives," Southern Economic Journal, Southern Economic Association, vol. 65(3), pages 405-426, January.
- Yann Bramoull? & Rachel Kranton & Martin D'Amours, 2014. "Strategic Interaction and Networks," American Economic Review, American Economic Association, vol. 104(3), pages 898-930, March.
- Guoqiang Tian & Liyan Yang, 2009. "Theory of negative consumption externalities with applications to the economics of happiness," Economic Theory, Springer, vol. 39(3), pages 399-424, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Juergen Jung).
If references are entirely missing, you can add them using this form.