Interdependent Preferences and Demand

For goods characterized by consumption externalities, market demand is not a simple aggregation of individual demands. This paper exactly solves several models for a large population with consumption externalities. The models may be characterized on two dimensions: i) co-ordination number (number of individuals which affect a given individual) ii) reciprocity (if individual a affects b, b affects a). Reciprocal models with co-ordination number two and infinite co-ordination are solved. The former model shows multiple equilibrium user sets while the latter shows demand discontinuities as a function of price. Models without reciprocity do not show multiple equilibrium user sets but do show demand discontinuities. We have not been able to solve reciprocal models with finite co-ordination number greater than two.