Some Anomalies Arising from Bandwagons that Impart Upward Sloping Segments to Market Demand

by Micha Gisser, James E. McClure, Giray Okten, Gary Santoni

*Micha Gisser*, professor emeritus, Department of Economics, University of New Mexico (MA and a PH.D, University of Chicago, 1962.) He has published many articles in academic journals such as _Econometrica, American Economic Review, Journal of Political E

*James E. McClure* (Ph.D., Purdue University, 1983) is Professor of Economics at Ball State University, where his research focus is microeconomics. His publications appear in journals such as: _Economic Inquiry, Econ Journal Watch, Journal of Economic Beh

_Giray Ökten_ (Ph.D., Claremont Graduate University, 1997) is Associate Professor in Department of Mathematics at Florida State University. His primary research is on Monte Carlo & quasi-Monte Carlo methods and Computational Finance. He has published in j

*Gary Santoni* (Ph.D., University of New Mexico, 1972) is Emeritus Professor of Economics at Ball State University, where his research focus is banking and finance. He has published in the _Journal of Money, Credit and Banking, Journal of Economic History

Abstract

In Gary Becker’s (1991) theory of bandwagon effects, a portion of market demand is positively sloped. In this, he ignores Harvey Leibenstein’s (1950) hypothesis that market demands for bandwagon goods are everywhere negatively sloped (stemming from scarcity imposed constraints). A substantial literature now invokes Becker’s bandwagon, also ignoring Leibenstein. Two anomalies attend Becker’s bandwagon demand when it slopes upward: 1) straightforward parameterizations are inconsistent with the economic requirement that quantities demanded be non-negative; 2) regardless of parameterization, the comparative statics of Becker’s demand carry unworldly implications.