Inertia, Interaction and Clustering in Demand
Babutsidze, Zakaria and Cowan, Robin (2009). Inertia, Interaction and Clustering in Demand. UNU-MERIT.
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Author Babutsidze, Zakaria
Cowan, RobinTitle Inertia, Interaction and Clustering in Demand Publication Date 2009 Publisher UNU-MERIT Abstract We present a discrete choice model of consumption that incorporates two empirically validated aspects of consumer behaviour: inertia in consumption and interaction among consumers. We specify the interaction structure as a regular lattice with consumers interacting only with immediate neighbours. We investigate the equilibrium behaviour of the resulting system and show analytically that for a large range of initial conditions clustering in economic behaviour emerges and persists indefinitely. Short-run behaviour of the model is investigated numerically. This exercise indicates that equilibrium properties of the system can predict a short-run behaviour of the model quite accurately. Keyword Clustering
Interaction
Habits
Consumer choiceJEL D11
D83
C65Copyright Holder UNU-MERIT Copyright Year 2009 -
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