Seller's dilemma due to social interactions between customers

Mirta B. Gordon, Jean-Pierre Nadal (), Denis Phan () and Jean Vannimenus

Physica A: Statistical Mechanics and its Applications, 2005, vol. 356, issue 2, 628-640

Abstract: In this paper, we consider a discrete choice model where heterogeneous agents are subject to mutual influences. We explore some consequences on the market's behaviour, in the simplest case of a uniform willingness to pay distribution. We exhibit a first-order phase transition in the profit optimization by the monopolist: if the social influence is strong enough, there is a regime where, if the mean willingness to pay increases, or if the production costs decrease, the optimal solution for the monopolist jumps from a solution with a high price and a small number of buyers, to a solution with a low price and a large number of buyers. Depending on the path of prices adjustments by the monopolist, simulations show hysteretic effects on the fraction of buyers.

Keywords: Ising model; Social interactions; Monopoly market; Econophysics (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (18)

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Working Paper: Seller's dilemma due to social interactions between customers (2005)
Working Paper: Sellers dilemna due to social interactions between customers (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:356:y:2005:i:2:p:628-640

DOI: 10.1016/j.physa.2005.03.003

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