James Peck, from Ohio State University, will be visiting UCL School of Management to present a seminar on ‘Temporary boycotts as self-fulfilling disruptions of markets.’
We consider a two-period durable goods monopoly model with demand uncertainty. When uncertainty is non-multiplicative, there can be equilibria in which, whenever the period 0 price exceeds a threshold, then with positive probability all consumers boycott in period 0. A consumer who in period 0 would purchase in the non-boycott equilibrium is willing to join a boycott because a boycott prevents the firm from learning demand. This dampens period 1 prices on average and makes the boycott self-fulfilling. Connections to the bank runs literature are discussed.
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