Habit Formation, Information Exchange and the Social Geography of Demand

Zakaria Babutsidze and Robin Cowan

No 2008-047, MERIT Working Papers from United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT)

Abstract: This paper is concerned with clustering in demand. We present a discrete choice model of consumption that incorporates habit formation and information exchange among consumers in fixed social networks. We provide an analytical solution to a special case of the model by using technical tools from chemistry and biology. We demonstrate the validity of these results for the general case numerically. It is shown that clustering in demand is a solution to the complex system we are analyzing, and that clustering pattern can be short-term or long-lasting depending on the characteristics of the society.

Keywords: demand; clustering; information; partial differential equations (search for similar items in EconPapers)
JEL-codes: C65 D11 D83 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:unm:unumer:2008047

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