On interconsumer externalities in a model of salesEvangelos Rouskas Manchester School, 2022, vol. 90, issue 6, 689-714 Abstract: I highlight interconsumer externalities in a static model of sales with homogeneous products and bidimensional consumer heterogeneity wherein there exists two‐type search intensity heterogeneity and two‐type valuation heterogeneity. An increase in the percentage of consumers with high valuation creates a dichotomy in the market. The consumers who experience the increase in their valuation become better off; I call these consumers privileged. All other consumers either become worse off or remain unaffected; I call the consumers who become worse off disadvantaged and the consumers who remain unaffected unprivileged. In the environment with privileged and disadvantaged consumers, the net effect on total consumer surplus is ambiguous. These results come in contrast to a dynamic Coasian version of the model in which if the percentage of consumers with high valuation increases, always all consumers become better off. Public policy interventions that target an increase in the welfare of consumers by altering the mix of the population should (i) distinguish between dynamic and static markets; and (ii) take into account under which conditions in static markets the net effect on consumer surplus is positive. Date: 2022 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:manchs:v:90:y:2022:i:6:p:689-714 Ordering information: This journal article can be ordered from Access Statistics for this article Manchester School is currently edited by Keith Blackburn More articles in Manchester School from University of Manchester Contact information at EDIRC. |
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