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Some Anomalies Arising from Bandwagons that Impart Upward-Sloping Segments to Market Demand

  • Micha Gisser

    (Department of Economics, University of New Mexico)

  • James E. McClure

    ()

    (Department of Economics, Ball State University)

  • Giray Ökten

    ()

    (Department of Mathematics, Florida State University)

  • Gary Santoni

    ()

    (Department of Economics, Ball State University)

In Gary Becker’s (1991) theory of bandwagon effects, a portion of market demand is positively sloped. In this, he ignores Harvey Leibenstein’s (1950) hypothesis that market demands for bandwagon goods are everywhere negatively sloped (stemming from scarcity imposed constraints). A substantial literature now invokes Becker’s bandwagon, also ignoring Leibenstein. Two anomalies attend Becker’s bandwagon demand when it slopes upward: 1) straightforward parameterizations are inconsistent with the economic requirement that quantities demanded be non-negative; 2) regardless of parameterization, the comparative statics of Becker’s demand carry unworldly implications.

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File URL: http://econfac.iweb.bsu.edu/research/workingpapers/bsuecwp200804gisser.pdf
File Function: First version, 2008
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Paper provided by Ball State University, Department of Economics in its series Working Papers with number 200804.

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Length: 17 pages
Date of creation: Dec 2008
Date of revision: Dec 2008
Handle: RePEc:bsu:wpaper:200804
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  1. 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.
  2. Karni, Edi & Levin, Dan, 1994. "Social Attributes and Strategic Equilibrium: A Restaurant Pricing Game," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 822-40, August.
  3. Gary S. Becker, 1974. "A Theory of Social Interactions," NBER Working Papers 0042, National Bureau of Economic Research, Inc.
  4. Gary S. Becker, 1991. "A Note on Restaurant Pricing and Other Examples of Social Influences on Price," University of Chicago - George G. Stigler Center for Study of Economy and State 67, Chicago - Center for Study of Economy and State.
  5. Corneo, Giacomo & Jeanne, Olivier, 1997. "Conspicuous consumption, snobbism and conformism," Journal of Public Economics, Elsevier, vol. 66(1), pages 55-71, October.
  6. Wolfgang Pesendorfer, 1993. "Design Innovation and Fashion Cycles," Discussion Papers 1049, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Stiglitz, Joseph E, 1987. "The Causes and Consequences of the Dependence of Quality on Price," Journal of Economic Literature, American Economic Association, vol. 25(1), pages 1-48, March.
  8. Haddock, David D & McChesney, Fred S, 1994. "Why Do Firms Contrive Shortages? The Economics of Intentional Mispricing," Economic Inquiry, Western Economic Association International, vol. 32(4), pages 562-81, October.
  9. Biddle, Jeff, 1991. "A Bandwagon Effect in Personalized License Plates?," Economic Inquiry, Western Economic Association International, vol. 29(2), pages 375-88, April.
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