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Demand Cycles and Heterogeneous Conformity Preferences

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  • Baumann, L.

Abstract

The paper analyzes the dynamics of demand for three options when agents differ in their preferences for conformity. Each agent seeks to imitate others who are more individualistic and to distinguish herself from others who are more conformist, relative to herself. In each period, every agent chooses her utility-maximizing option given each agent's demand in the previous period. It is shown that for a large class of initial demand distributions, demand dynamics resemble fashion cycles: Total demand for each option over time is wave-like, and, when positively demanded, an option trickles through the entire population, from individualistic towards conformist agents.

Suggested Citation

  • Baumann, L., 2019. "Demand Cycles and Heterogeneous Conformity Preferences," Cambridge Working Papers in Economics 1922, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:1922
    Note: lb714
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    fashion cycle; demand cycle; conformity; individuality; dynamics; distribution of demand;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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