Bandwagon and Snob effects : A Model of observable consumer behavior
The independence of preferences, normally assumed in consumer theory, is rather problematic when it comes to explaining observable consumer behavior. One of the most notorious cases is when the desire for status affects the purchasing decision of consumers; this can be seen in Leibenstein's Bandwagon and Snob effects. Here I present and simulate a dynamic model of interdependent preferences for an economy of two representative consumers with different income levels and two goods, of which one provides status. I start from the demand functions derived from a member of the Bergson Family of utility functions, and non-linear adjustment formulas based on the Bandwagon and Snob effects that modify the weights in the utility function period by period. The results of the Python simulation suggest convergence to spefi c optimal demands the goods: the low-income consumer ends up sacri ficing part of his/her consumption of the market basket status-driven consumption.
- Pregrado en Economía