Demand with Celebrity Effects

Abstract

Suppose you have never tried Indian food, so you and some friends go to an Indian restaurant. One of your friends happens to be an avid gastronome, so, understandably, you decide to follow her lead and order the lamb curry, which she says is one of her favorites. Now suppose that you are about to buy a sweater at a department store. You are in line to check out when you notice that a person much older than you is wearing the exact same sweater. You are unwilling to accept that you have such dated tastes and put the sweater back. Each of the above situations demonstrates what I will refer to as a “celebrity effect.” In the first situation, your friend had a positive celebrity effect on your preferences. In the second example, the older person had a negative celebrity effect. In this article, I introduce such effects into demand theory through what I call “conditional” demand curves.