Template-type: ReDIF-Paper 1.0
Author-Name: Babutsidze, Zakaria
Author-Email: babutsidze@merit.unu.edu
Author-Workplace-Name: UNU-MERIT
Author-Name: Cowan, Robin
Author-Email: cowan@merit.unu.edu
Author-Workplace-Name: UNU-MERIT, Maastricht University,
	 and BETA - Universite Louis Pasteur
Title: Inertia, Interaction and Clustering in Demand
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.
Classification-JEL: D11, D83, C65
Keywords: Clustering, Interaction, Habits, Consumer choice
Series: UNU-MERIT Working Papers
Creation-Date: 2009
Number: 045
File-URL: http://www.merit.unu.edu/publications/wppdf/2009/wp2009-045.pdf
File-Format: application/pdf
File-Size: 275 Kb
Handle: RePEc:unm:unumer:2009045