This paper considers an economic mechanism that explains “Your Friends Make You Fat” – the contagious phenomenon of obesity first addressed by sociology and medical scholars (Christakis and Fowler, 2007). Consumers choose between slow food and fast food. Eating the same food with friends has social values, thus lifting fast food’s value, in addition to its merit of convenience.
For this reason, the network effect is playing a role in the consumers’ decision process. On the supply side, food producers charge an optimal price which exploits the heterogeneity among consumers to maximize profit. This model shows that low production cost gives fast food an advantage, while fixed costs discourage them. The expectation of fast food eating can be self-fulfilling when a sufficiently high expectation is formed.
Baiyang Huang, ’13
Sponsor: Santhi Hejeebu