Nice to see you thinking about alternatives, but in this case I don’t think that its very realistic to imagine that there are many information barriers to support your first scenario of risk aversion. Any alternative to plastic bags is likely to be visible, cost little to sample, and probably be to some extent publicised when introduced (if a tax on plastic bags is introduced, supermarkets and the govt will be quick to point out the alternative I’ll wager). Plus, people already have an intuitive idea of what a good and a bad bad feels like.

As for your second idea, its probably more realistic. That said, I don’t think that it applies. I may be suffering from insularisation from mainly only visiting inner city new world metro’s, where a lot of people find it ‘trendy’ to use reusable bags, but suggest that there are likely to be three types of consumer: 1 – biggest group, do whatever is cheapest and easiest; 2 – insular views, trendy in their minds to use reusable bags so will do that; 3 – your sheep, I mean people that strategic complementarity applies to.

With the tax, some portion of group one will switch away from plastic bags (I’m going to be realistic and assume that the tax will affect different people differently, as there will be a range of cost-benefits for using plastic bags v resuable across differnt people that this will effect). Finally, your group of sheep will tip one way or another depending on how many of the people from group one switch.

This way we don’t quite get the all or nothing outcome. Another more realistic scenario would be giving people individual utility functions, and only some weighting on sheepishness. I think that this applies more or less to most things. Some people are complete sheep – weighting 100%. Some peope think for themselves – 0% sheepishness. They put the balance of their weighting on their specific preferences etc. I don’t know exactly how sheepish most people are with shopping bags, probably highish realatively speaking because the issue is one that people don’t often think about, but I doubt it would anywhere close to 100%.

That’s not true. In the pricing equilibrium they have to pay a positive price for the plastic bag, in the banning equilibrium they do not have to pay anything for the non-plastic bags. If they ex-post value the bags evenly then they are better off in the banning equilibrium 😉

Say that supermarkets offer both plastic and non-plastic bags, and that the consumers choice of bag depends on what other people are using. If other people are using plastic bags you don’t want to be different, and so you use plastic bags. In this case we have a thing called ‘strategic complementarity’ between bag users. Here there are two equilibrium – all use plastic bags, and all use non-plastic bags.

Now if we reach a state where everyone is using plastic bags, as long as the price of the bag is lower than the benefit that people get from having the same bags as other people, we will stay in the plastic bag only state.

If we ban plastic bags, we immediately shift everyone to the ‘all use non-plastic bags’ equilibrium, problem solved.

Note: The first model and this one are better than the priced equilibrium as the consumers of bags are better off than they would be in the priced equilibrium while everyone else is indifferent. Just thought I should make that clearer 🙂

Additionally, where are plastic bags made? One could even bring in an economic nationalist/mercentalist perspective if they are being imported, or made from imported substances, when in fact they could be substituted for a New Zealand produced alternative.