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Waves in consumption with interdependence among consumers

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  • Robin Cowan
  • William Cowan
  • G.M. Peter Swann

Abstract

In this paper we model the development of consumption when there are interactions between consumers. The consumer recognizes three reference groups: peer, distinction, and aspiration. The interplay of aspiration and distinction can lead to `waves' in consumption; for example, the avant-garde consumption of up-market pioneers is copied by other types of consumer. As the latter aspire to emulate the former, the former seek distinction by varying their consumption. A consumption activity may start up market, then gradually descend the social spectrum. More complex patterns with continuing cycles in consumption can also be found.

Suggested Citation

  • Robin Cowan & William Cowan & G.M. Peter Swann, 2004. "Waves in consumption with interdependence among consumers," Canadian Journal of Economics, Canadian Economics Association, vol. 37(1), pages 149-177, February.
  • Handle: RePEc:cje:issued:v:37:y:2004:i:1:p:149-177
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    References listed on IDEAS

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    1. George A. Akerlof, 1997. "Social Distance and Social Decisions," Econometrica, Econometric Society, vol. 65(5), pages 1005-1028, September.
    2. An, M Y & Kiefer, N M, 1995. "Local Externalities and Societal Adoption of Technologies," Journal of Evolutionary Economics, Springer, vol. 5(2), pages 103-117, June.
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    Cited by:

    1. Sjögren, Tomas, 2016. "Consumption Norms with Endogenous Norm Beliefs – Implications for Welfare, Commodity Taxation and Income Redistribution," Umeå Economic Studies 938, Umeå University, Department of Economics.
    2. Giulia Iori & Vassilis Koulovassilopoulos, 1999. "Patterns of consumption in socio-economic models with heterogeneous interacting agents," Papers cond-mat/9909131, arXiv.org.
    3. Pesaran, M. Hashem & Tosetti, Elisa, 2011. "Large panels with common factors and spatial correlation," Journal of Econometrics, Elsevier, vol. 161(2), pages 182-202, April.
    4. Giorgio Fagiolo, 2001. "Coordination, Local Interactions and Endogenous Neighborhood Formation," LEM Papers Series 2001/15, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    5. Floortje Alkemade & Carolina Castaldi, 2005. "Strategies for the Diffusion of Innovations on Social Networks," Computational Economics, Springer;Society for Computational Economics, vol. 25(1), pages 3-23, February.
    6. Eckerstorfer, Paul & Wendner, Ronald, 2013. "Asymmetric and non-atmospheric consumption externalities, and efficient consumption taxation," Journal of Public Economics, Elsevier, vol. 106(C), pages 42-56.
    7. Zakaria Babutsidze, 2009. "Learning How to Consume and Returns to Product Promotion," Papers on Economics and Evolution 2009-05, Philipps University Marburg, Department of Geography.
    8. Zakaria Babutsidze, 2012. "Consumer Learning through Interaction: Effects on Aggregate Outcomes," Chapters,in: Evolution, Organization and Economic Behavior, chapter 4 Edward Elgar Publishing.
    9. Fagiolo, Giorgio, 2005. "Endogenous neighborhood formation in a local coordination model with negative network externalities," Journal of Economic Dynamics and Control, Elsevier, vol. 29(1-2), pages 297-319, January.
    10. Zakaria Babutsidze, 2011. "Returns to product promotion when consumers are learning how to consume," Journal of Evolutionary Economics, Springer, vol. 21(5), pages 783-801, December.
    11. repec:spr:joevec:v:27:y:2017:i:5:d:10.1007_s00191-017-0517-5 is not listed on IDEAS

    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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