The Effects and Consequences of Simultaneously Arising Different Network Externalities on the Demand for Status Goods

Kármen Kovács

Metroeconomica, 2015, vol. 66, issue 3, 375-396

Abstract: The purpose of this paper is to explore how two main forms of network externalities, bandwagon and snob effects, influence the market demand for status goods when they arise simultaneously. If the snob effect is greater than the bandwagon effect, the demand function involving both effects is less elastic than the demand function that does not involve network externalities; however, the market demand function becomes increasingly elastic as the bandwagon effect becomes stronger. By introducing the concept of net social external effect, the change in the quantity demanded as a consequence of the resultant of network externalities can be measured.

Date: 2015
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