Consumption Externalities, Coordination, and Advertising*

Network Topologies and Consumption Externalities

The economic implications of network topologies are studied via a monopolist’s model of market networks originally proposed by Phan, et al. (2003). By embedding the market into a larger collection of network topologies, in particular, a class of scale-free networks, we extend the early analysis built upon a class of ring networks. To facilitate the study of the impacts of network topologies upo...

Advertising and Conspicuous Consumption

The paper formalizes the intuition that brands are consumed for image reasons and that advertising creates a brand’s image. The key idea is that advertising informs the public of brand names and creates the possibility of conspicuous consumption by rendering brands a signalling device. In a price competition framework, we show that advertising increases consumers’ willingness to pay and thus pr...

Correcting Audience Externalities in Television Advertising

Advertising, Mass Consumption and Capitalism∗

Western societies have developed into a historically new stage in the evolution of capitalism, one which is characterized by corporations exercising monopolistic power and sustaining demand by advertising through the media. While this theme has been emphasized e.g., by J. A. Schumpeter in Business Cycles; A Theoretical, Historical and Statistical Analysis of the Capitalist Process, chapter III,...

Equilibrium portfolios with consumption externalities

We examine the equilibrium consumption and portfolio strategies in an economy with consumption externalities. We consider a model where the von Neumann-Morgenstern utility is a function of one's own consumption and of the average consumption in the economy in the corresponding state or date. We show that, under some conditions on the degree of conformism in the economy, the optimal portfolio an...