A MARKET WITH A SOCIAL CONSUMPTION EXTERNALITY*

James Friedman and Isabel Grilo

The Japanese Economic Review, 2005, vol. 56, issue 3, 251-272

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 |x–y|, which declines as |x–y| 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.

Date: 2005
References: View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://doi.org/10.1111/j.1468-5876.2005.00331.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jecrev:v:56:y:2005:i:3:p:251-272

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1352-4739

Access Statistics for this article

The Japanese Economic Review is currently edited by Akira Okada

More articles in The Japanese Economic Review from Japanese Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().