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Waves in Consumption with Interdependence among Consumers

Author

Listed:
  • Cowan, Robin
  • Cowan, William
  • Swann, Peter

    (MERIT)

Abstract

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.

Suggested Citation

  • Cowan, Robin & Cowan, William & Swann, Peter, 1998. "Waves in Consumption with Interdependence among Consumers," Research Memorandum 007, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  • Handle: RePEc:unm:umamer:1998007
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    File URL: https://www.merit.unu.edu/publications/rmpdf/1998/rm1998-007.pdf
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    References listed on IDEAS

    as
    1. George A. Akerlof, 1997. "Social Distance and Social Decisions," Econometrica, Econometric Society, vol. 65(5), pages 1005-1028, September.
    2. An, M Y & Kiefer, N M, 1995. "Local Externalities and Societal Adoption of Technologies," Journal of Evolutionary Economics, Springer, vol. 5(2), pages 103-117, June.
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    Citations

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    Cited by:

    1. Sjögren, Tomas, 2016. "Consumption Norms with Endogenous Norm Beliefs – Implications for Welfare, Commodity Taxation and Income Redistribution," Umeå Economic Studies 938, Umeå University, Department of Economics.
    2. Pesaran, M. Hashem & Tosetti, Elisa, 2011. "Large panels with common factors and spatial correlation," Journal of Econometrics, Elsevier, vol. 161(2), pages 182-202, April.
    3. Giorgio Fagiolo, 2001. "Coordination, Local Interactions and Endogenous Neighborhood Formation," LEM Papers Series 2001/15, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    4. Floortje Alkemade & Carolina Castaldi, 2005. "Strategies for the Diffusion of Innovations on Social Networks," Computational Economics, Springer;Society for Computational Economics, vol. 25(1), pages 3-23, February.
    5. Eckerstorfer, Paul & Wendner, Ronald, 2013. "Asymmetric and non-atmospheric consumption externalities, and efficient consumption taxation," Journal of Public Economics, Elsevier, vol. 106(C), pages 42-56.
    6. Zakaria Babutsidze, 2012. "Consumer Learning through Interaction: Effects on Aggregate Outcomes," Chapters,in: Evolution, Organization and Economic Behavior, chapter 4 Edward Elgar Publishing.
    7. Giulia Iori & Vassilis Koulovassilopoulos, 1999. "Patterns of consumption in socio-economic models with heterogeneous interacting agents," Papers cond-mat/9909131, arXiv.org.
    8. Zakaria Babutsidze, 2009. "Learning How to Consume and Returns to Product Promotion," Papers on Economics and Evolution 2009-05, Philipps University Marburg, Department of Geography.
    9. Fagiolo, Giorgio, 2005. "Endogenous neighborhood formation in a local coordination model with negative network externalities," Journal of Economic Dynamics and Control, Elsevier, vol. 29(1-2), pages 297-319, January.
    10. Zakaria Babutsidze, 2011. "Returns to product promotion when consumers are learning how to consume," Journal of Evolutionary Economics, Springer, vol. 21(5), pages 783-801, December.
    11. repec:spr:joevec:v:27:y:2017:i:5:d:10.1007_s00191-017-0517-5 is not listed on IDEAS

    More about this item

    Keywords

    microeconomics ;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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