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Waves in Consumption with Interdependence among Consumers

  • Cowan Robin
  • Cowan William
  • Swann Peter

    (MERIT)

This paper presents a model to analyze the development of consumption patterns when there are social interactions among consumers. In particular a consumer in this model recognizes three reference groups: a peer group of similar consumers with whom the consumer wishes to share consumption activities; a distinction group from which the consumer wishes to distinguish him- or herself; and an aspiration group, to which the consumer does not belong but wishes that he/she did, and with whom the consumer would like to share consumption activities. The interplay of aspiration and distinction can lead to "waves" in consumption. These can happen when, 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 in turn seek to distinguish themselves from these unwelcome companions by varying their consumption. In consequence a particular consumption activity may start up-market, an then gradually proceed down the social spectrum. More complex patterns with continuing cycles in consumption can also be found. The paper argues that this model is not only applicable to the consumption behaviour of an elite (or would-be elite) but is relevant in a wide range of consumption settings.

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Paper provided by Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT) in its series Research Memorandum with number 007.

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Date of creation: 1998
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Handle: RePEc:unm:umamer:1998007
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  1. An, M Y & Kiefer, N M, 1995. "Local Externalities and Societal Adoption of Technologies," Journal of Evolutionary Economics, Springer, vol. 5(2), pages 103-17, June.
  2. George A. Akerlof, 1997. "Social Distance and Social Decisions," Econometrica, Econometric Society, vol. 65(5), pages 1005-1028, September.
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