Fashion and wealth accumulation

Shouyong Shi

Economic Theory, 1999, vol. 14, issue 2, 439-461

Abstract: This paper examines the influence of fashion on wealth accumulation in an economy with two groups of agents. Fashion is modelled as an externality generated by a particular dependence of individual agents' time preference on the two groups' per-capita consumption habits. It is shown that fashion causes excessive wealth fluctuations in the sense that stronger and more persistent fashion is more likely to generate limit cycles in wealth. Opposite to intuitive arguments , however, the externality in fashion does not necessarily generate instability in wealth. In a special case, equilibrium consumption and wealth are stable but the optimal ones that internalize the externality are locally unstable. Whether equilibrium consumption is excessive relative to optimal consumption depends on the distribution as well as the aggregate level of wealth.

Keywords: Fashion; Habits; Limit cycles; Wealth accumulation. (search for similar items in EconPapers)
JEL-codes: D91 E21 (search for similar items in EconPapers)
Date: 1999-08-24
Note: Received: December 15, 1995; revised version: July 21, 1998
References: Add references at CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://link.springer.de/link/service/journals/00199/papers/9014002/90140439.pdf (application/pdf)
Access to the full text of the articles in this series is restricted

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:spr:joecth:v:14:y:1999:i:2:p:439-461

Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/199/PS2

Access Statistics for this article

Economic Theory is currently edited by Nichoals Yanneils

More articles in Economic Theory from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().