Toward an Economic Theory of Fashion

Competition for rank within animal societies is an innate drive recognized in sociobiological and evolutionary theory. In human societies, fashion signals social rank or status. We extend standard economic theories of competitive and noncompetitive markets to analyze fashion by including the status‐seeking incentive. In the competitive case, the conditions under which fashion cycles occur are examined. In the noncompetitive case, producers of fashion services discriminate between customers intertemporally to sustain the fashionability of their services. Unlike the standard models of fashion that populate marketing textbooks, our theory of fashion does not require that demand curves slope upward.