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

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Micha Gisser & James E. McClure & Giray Ökten & Gary Santoni, 2008. "Some Anomalies Arising from Bandwagons that Impart Upward-Sloping Segments to Market Demand," Working Papers 200804, Ball State University, Department of Economics, revised Dec 2008.
  • Handle: RePEc:bsu:wpaper:200804
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    File URL: http://web.bsu.edu/cob/econ/research/papers/bsuecwp200804gisser.pdf
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    References listed on IDEAS

    as
    1. Becker, Gary S, 1974. "A Theory of Social Interactions," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1063-1093, Nov.-Dec..
    2. Pesendorfer, Wolfgang, 1995. "Design Innovation and Fashion Cycles," American Economic Review, American Economic Association, vol. 85(4), pages 771-792, September.
    3. 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 822-840, August.
    4. 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.
    5. Becker, Gary S, 1991. "A Note on Restaurant Pricing and Other Examples of Social Influences on Price," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1109-1116, October.
    6. 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 562-581, October.
    7. Corneo, Giacomo & Jeanne, Olivier, 1997. "Conspicuous consumption, snobbism and conformism," Journal of Public Economics, Elsevier, vol. 66(1), pages 55-71, October.
    8. H. Leibenstein, 1950. "Bandwagon, Snob, and Veblen Effects in the Theory of Consumers' Demand," The Quarterly Journal of Economics, Oxford University Press, vol. 64(2), pages 183-207.
    9. 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.
    10. Biddle, Jeff, 1991. "A Bandwagon Effect in Personalized License Plates?," Economic Inquiry, Western Economic Association International, vol. 29(2), pages 375-388, April.
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    Cited by:

    1. Finn Christensen, 2014. "Comparative Statics, Stability, and Uniqueness," Working Papers 2014-02, Towson University, Department of Economics, revised Mar 2015.

    More about this item

    Keywords

    Bandwagon Effect; Law of Demand;

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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