A market with a social consumption externality
(2005) The Japanese Economic Review — Vol. 56, n° 3, p. 251-272 (2005)
Files
No attached file found for this publication.
Details
- Authors
- Abstract
- We model a spatial market in which the utility of each consumer is affected by the consumers who buy precisely the same product. The marginal contribution of consumers x's purchase on consumer y depends on vertical bar x-y vertical bar, which declines as vertical bar x-y vertical bar increases. Such modelling of preferences fits goods that signal a consumer's place in society-clothing styles, automobiles and jewellry are examples. For 2n + 1 firms we find the unique symmetric equilibrium and derive comparative statics on the optimal number of firms, the largest number of firms the market can support, and the behaviour of profits per firm as n increases.
- Affiliations
Citations
Friedman, J., & Grilo, I. (2005). A market with a social consumption externality. The Japanese Economic Review, 56(3), 251-272. https://doi.org/10.1111/j.1468-5876.2005.00331.x (Original work published 2005)