Sellers dilemna due to social interactions between customers

Mirta Gordon (), Jean-Pierre Nadal, Denis Phan () and Jean Vannimenus
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Mirta Gordon: Leibniz - IMAG - Laboratoire Leibniz - UJF - Université Joseph Fourier - Grenoble 1 - INPG - Institut National Polytechnique de Grenoble - CNRS - Centre National de la Recherche Scientifique
Jean Vannimenus: LPS - Laboratoire de Physique Statistique de l'ENS - FRDPENS - Fédération de recherche du Département de physique de l'Ecole Normale Supérieure - ENS Paris - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique - UPMC - Université Pierre et Marie Curie - Paris 6 - UPD7 - Université Paris Diderot - Paris 7 - CNRS - Centre National de la Recherche Scientifique

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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 (8)

Published in Physica A: Statistical Mechanics and its Applications, 2005, 356 (2-4), pp.628-640

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Journal Article: Seller's dilemma due to social interactions between customers (2005)
Working Paper: Seller's dilemma due to social interactions between customers (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00078451

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