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Consumption Externalities (consumption + externality)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

Consumption Externalities, Coordination, and Advertising*

INTERNATIONAL ECONOMIC REVIEW, Issue 3 2002
Ivan Pastine
The aim of this article is to demonstrate that advertising can have an important function in markets with consumption externalities apart from its persuasive and informative roles. We show that advertising may function as a device to coordinate consumer expectations of the purchasing decisions of other consumers in markets with consumption externalities. The implications of advertising as a coordinating device are examined in the pricing and advertising decisions of firms interacting strategically. Although, at times, the one-period advertising expense can exceed the one-period monopoly profit, in equilibrium, consumers will pay a premium for the more heavily advertised brand. [source]

Consumption Externalities, Production Externalities and Indeterminacy

METROECONOMICA, Issue 4 2000
Mark Weder
In this paper we show that consumption externalities reduce the degree of increasing returns needed to generate indeterminacy in a two-sector optimal growth model. In equilibrium, consumption externalities operate as if the utility function is (close to) linear. If these externalities are strong, the minimum necessary increasing returns approach zero. Therefore, this paper,in a stylized fashion,provides an example of how microbehavior, i.e. interactions at the household level, can generate aggregate instability. Consumption externalities also help to eliminate the counterfactual cyclical behavior of consumption in the two-sector model. [source]

Consumption Externalities, Coordination, and Advertising*

INTERNATIONAL ECONOMIC REVIEW, Issue 3 2002
Ivan Pastine
The aim of this article is to demonstrate that advertising can have an important function in markets with consumption externalities apart from its persuasive and informative roles. We show that advertising may function as a device to coordinate consumer expectations of the purchasing decisions of other consumers in markets with consumption externalities. The implications of advertising as a coordinating device are examined in the pricing and advertising decisions of firms interacting strategically. Although, at times, the one-period advertising expense can exceed the one-period monopoly profit, in equilibrium, consumers will pay a premium for the more heavily advertised brand. [source]

Inefficient Local Regulation of Local Externalities

JOURNAL OF PUBLIC ECONOMIC THEORY, Issue 3 2005
GREGORY BESHAROV
The consequences of commitment failure have been missing from debates about the decentralized regulation of automobile emissions and other sources of local consumption externalities. Even when the direct external effects of such products are limited to a single jurisdiction, the presence of increasing returns-to-scale production causes one jurisdiction's choice of regulatory standard to affect the prices and availability of goods elsewhere. Decentralized regulatory equilibria may be inefficient as a result. Because of a commitment failure, production may be split between standards,and consumers denied the full range of products,when it is efficient to have standards that allow products to be consumed everywhere. Coordination failures may cause similar inefficiencies. The results question the usefulness of the principle of subsidiarity as commonly employed. [source]

Consumption Externalities, Production Externalities and Indeterminacy

METROECONOMICA, Issue 4 2000
Mark Weder
In this paper we show that consumption externalities reduce the degree of increasing returns needed to generate indeterminacy in a two-sector optimal growth model. In equilibrium, consumption externalities operate as if the utility function is (close to) linear. If these externalities are strong, the minimum necessary increasing returns approach zero. Therefore, this paper,in a stylized fashion,provides an example of how microbehavior, i.e. interactions at the household level, can generate aggregate instability. Consumption externalities also help to eliminate the counterfactual cyclical behavior of consumption in the two-sector model. [source]

WELFARE-MAXIMISING PRICING IN A MACROECONOMIC MODEL WITH IMPERFECT COMPETITION AND CONSUMPTION EXTERNALITIES

AUSTRALIAN ECONOMIC PAPERS, Issue 3 2010
CHI-TING CHIN
This paper develops a simple macroeconomic model with imperfect competition and consumption externalities, and uses it to examine whether the marginal cost pricing rule in the partial equilibrium framework can apply to the general equilibrium framework. It is shown that, for welfare to be maximised, average revenue should be set equal to marginal cost if consumption externalities are either absent or positive. However, for welfare to be maximised, average revenue should be set higher than marginal cost in the presence of negative consumption externalities. [source]

CAPACITY EXPANSION IN MARKETS WITH INTER-TEMPORAL CONSUMPTION EXTERNALITIES

AUSTRALIAN ECONOMIC PAPERS, Issue 2 2010
Article first published online: 20 MAY 2010, HIROSHI KITAMURA
This paper analyses market capacity expansion in the presence of inter-temporal consumption externalities such as consumer learning, networks and bandwagon effects. An externality leads to an endogenous shift of market demand that responds to past market capacity. Whereas market capacity grows in waves, its magnitude depends on the degree of market concentration. The competitive environment contributes to S-shaped time patterns of market capacity expansion. On the other hand, using a low introductory price, a monopolist plans an initially larger amount of market cultivation than a competitive market capacity expansion. [source]