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Social Interactions in Demand

Author

Listed:
  • Grodner, Andrew

    (East Carolina University)

  • Kniesner, Thomas J.

    (Claremont Graduate University)

Abstract

We examine theoretically demand in a two-good economy where the demand of one good is influenced by either a spillover effect in the form of an externality from other consumers’ choices and or a conformity effect representing a need for making similar choices as others. A positive spillover effect increases the demand for the good with interactions, and a conformity effect makes the demand curve pivot around the average market demand to make demand less price sensitive. The collateral implication is that spillover in consumption increases the associated derived demand for labor and conformity in consumption makes the associated derived demand for labor less elastic. Finally, we also demonstrate how the presence of a good with social interactions affects the demand for the good without social interactions and the associated demand for the labor producing the non-interactions good.

Suggested Citation

  • Grodner, Andrew & Kniesner, Thomas J., 2008. "Social Interactions in Demand," IZA Discussion Papers 3656, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp3656
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    References listed on IDEAS

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    1. Andrew Grodner & Thomas J. Kniesner, 2006. "Social Interactions in Labor Supply," Journal of the European Economic Association, MIT Press, vol. 4(6), pages 1226-1248, December.
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    Cited by:

    1. Thomas J. Kniesner, 2019. "Behavioral economics and the value of a statistical life," Journal of Risk and Uncertainty, Springer, vol. 58(2), pages 207-217, June.
    2. Julie Beugnot & Bernard Fortin & Guy Lacroix & Marie Claire Villeval, 2013. "Social Networks and Peer Effects at Work," Cahiers de recherche 1320, CIRPEE.
    3. Beugnot, Julie & Fortin, Bernard & Lacroix, Guy & Villeval, Marie Claire, 2019. "Gender and peer effects on performance in social networks," European Economic Review, Elsevier, vol. 113(C), pages 207-224.
    4. Julie Beugnot & Bernard Fortin & Guy Lacroix & Marie Claire Villeval, 2013. "Social Networks and Peer Effects at Work," Cahiers de recherche 1320, CIRPEE.
    5. Beugnot, Julie & Fortin, Bernard & Lacroix, Guy & Villeval, Marie Claire, 2013. "Social Networks and Peer Effects at Work," IZA Discussion Papers 7521, Institute of Labor Economics (IZA).
    6. Grajzl, Peter & Baniak, Andrzej, 2012. "Mandating behavioral conformity in social groups with conformist members," Journal of Economic Behavior & Organization, Elsevier, vol. 82(2), pages 479-493.
    7. Grodner, Andrew & Kniesner, Thomas J. & Bishop, John A., 2011. "Social Interactions in the Labor Market," Foundations and Trends(R) in Microeconomics, now publishers, vol. 6(4), pages 265-366, September.
    8. Altundere, Merve Büşra, 2014. "The Relationship Between Sociability and Household Debt," MPRA Paper 90617, University Library of Munich, Germany.
    9. Julie Beugnot & Bernard Fortin & Guy Lacroix & Marie Claire Villeval, 2013. "Social Networks and Peer Effects at Work," Cahiers de recherche 1320, CIRPEE.
    10. Ariel H. Fambeu, 2019. "Peer Effect and Environmental Responsibility of Enterprises in a Sub-Saharan African Country," Economics Bulletin, AccessEcon, vol. 39(2), pages 1084-1094.

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    More about this item

    Keywords

    spillover; social interactions; consumer demand; conformity; labor demand;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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    This paper has been announced in the following NEP Reports:

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