Some Anomalies Arising from Bandwagons that Impart Upward Sloping Segments to Market Demand

Harvey leibenstein’s (1950) seminal QJE article, “Bandwagon, snob, and Veblen Effects in the Theory of the Consumers’ Demand,” defines the bandwagon effect as “the extent to which the demand for a commodity is increased due to the fact that others are also consuming the same commodity”(leibenstein 1950, 189). a key aspect of his formulation is that scarcity precludes runaway bandwagon effects. leibenstein posits a “diminishing marginal external consumption effect”: [T]he income constraint is sufficient to establish that there must be a point at which increases in a consumer’s demand must fail to respond to increases in demand by others. since every consumer is subject to the income constraint, it must follow that the principle [of diminishing marginal external consumption effect] holds for all consumers (leibenstein 1950, 193). Invoking this principle, leibenstein hypothesizes demand curves for bandwagon goods are everywhere negatively sloped. gary Becker’s (1991) model ignores leibenstein’s scarcity constraint in favor of bandwagons that impart positive slopes—despite the fact that there is no 1 department of economics, university of new Mexico, albuquerque, nM 87131. 2 department of economics, Ball state university, Muncie, In 47306. 3 department of Mathematics, Florida state universty, tallahassee, Fl 32306. 4 department of economics, Ball state university, Muncie, In 47306. Econ Journal Watch Volume 6, Number 1 January 2009, pp 21-34 Some Anomalies Arising from Bandwagons that Impart Upward Sloping Segments to Market Demand