Sellers dilemna due to social interactions between customers

Mirta Gordon (1) , Jean-Pierre Nadal (2) , Denis Phan (3) , Jean Vannimenus (2)

1 Leibniz - IMAG - Laboratoire Leibniz
2 LPS - Laboratoire de Physique Statistique de l'ENS
3 CREM - Centre de recherche en économie et management

In this paper, we consider a discrete choice model where heterogeneous agents are subject to mutual influences. We explore some consequences on the market's behaviour, in the simplest case of a uniform willingness to pay distribution. We exhibit a first-order phase transition in the profit optimization by the monopolist: if the social influence is strong enough, there is a regime where, if the mean willingness to pay increases, or if the production costs decrease, the optimal solution for the monopolist jumps from a solution with a high price and a small number of buyers, to a solution with a low price and a large number of buyers. Depending on the path of prices adjustments by the monopolist, simulations show hysteretic effects on the fraction of buyers.

Mots clés: Ising model; Social interactions; Monopoly market; Econophysics

Domaines: Gestion et management

Mirta Gordon, Jean-Pierre Nadal, Denis Phan, Jean Vannimenus. Sellers dilemna due to social interactions between customers. Physica A: Statistical Mechanics and its Applications, 2005, 356 (2-4), pp.628-640. ⟨halshs-00078451⟩