Habit Formation, Information Exchange and Geography of Demand

Zakaria Babutsidze, UNU-MERIT and Department of Economics, Maastricht University

This paper is concerned with the geographical pattern of demand. I present a model of consumption which incorporates heterogeneity of consumers, information exchange among them in geographically fixed neighborhoods and habit formation features. A special, simplified version of the model is analytically solved using technical tools from chemistry and biology. It is shown that, even if the tastes of consumers do not exhibit the any particular geographic pattern and goods under discussion are close substitutes, demand does cluster geographically.

Venue: FDEWB, Tongersestraat 53, Room A 0.23

Date: 07 March 2007

Time: 16:00 - choos  CET