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Social Influence and Consumption: Evidence from the Automobile Purchases of Neighbors
Abstract
This study analyzes the automobile purchase behavior of all residents of two Finnish provinces over several years. Using a comprehensive data set with location coordinates at the individual consumer level, it finds that the purchases of neighbors, particularly in the recent past and by those who are geographically most proximate, influence a consumer's purchases of automobiles. There is little evidence that emotional biases, like envy, account for the observed social influence on consumption. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
... Potential adopters improve their understanding of an innovation by seeing it demonstrated or trialled (Young, 2009) which can lead to faster adoption rates (Rogers, 2003). This is significant and distinguishable from information exchange within closely related socioeconomic groups (Goetzke and Weinberger, 2012;Grinblatt et al., 2008;Heffetz, 2011). ...
... Within 31 different expenditure categories in the USA including clothing, jewellery, home furnishings and mobile phones, Heffetz (2011) found vehicles to be the second most visible to other people living in close proximity. People are more likely to own or purchase a certain type of car if people living around them have done so recently (Adjemian et al., 2010;Grinblatt et al., 2008;Mau et al., 2008). Although a strong neighbourhood effect is evident in both urban and rural communities (Goetzke and Weinberger, 2012;McShane et al., 2012;Yang and Allenby, 2003;Zhu and Chao, 2013), it can be stronger in rural areas with lower population density (Grinblatt et al., 2008;Shemesh and Zapatero, 2014). ...
... People are more likely to own or purchase a certain type of car if people living around them have done so recently (Adjemian et al., 2010;Grinblatt et al., 2008;Mau et al., 2008). Although a strong neighbourhood effect is evident in both urban and rural communities (Goetzke and Weinberger, 2012;McShane et al., 2012;Yang and Allenby, 2003;Zhu and Chao, 2013), it can be stronger in rural areas with lower population density (Grinblatt et al., 2008;Shemesh and Zapatero, 2014). ...
Alternative fuel vehicle technologies are needed to mitigate rising greenhouse gas emissions from transport. Social influence is integral to the diffusion of private vehicles which are highly visible and fulfil practical as well as social functions. This paper provides the first meta-analysis of empirical studies which measure the strength of social influence on consumer vehicle choice. A systematic literature review identified 21 studies that examined three types of social influence: interpersonal communication; neighbourhood effect; and conformity with social norms. A random effects meta-analysis found a significant and small to moderate effect of social influence on vehicle choices (r = 0.241, p < 0.001). The overall effect size did not vary significantly between types of social influence nor between types of vehicle (conventional or alternative fuel). However, further analysis using meta-regression found that heterogeneity in social influence effect size across studies was explained by differences in countries' cultural receptiveness to normative influence. These findings have important implications for policy and modelling analysis of alternative fuel vehicle adoption, for which diffusion is both a socially and culturally-mediated process.
... The starting point of this research is the observation that peers play a signi…cant role in in ‡uencing consumption behavior of individuals. This evidence comes from a small but growing body of literature on neighborhood and peer e¤ects in consumption, mostly in developed countries (e.g., Grinblatt et al., 2008;Angelucci and De Giorgi, 2009;Kuhn et al., 2011;Moretti, 2011;Roth, 2015;De Giorgi et al., 2016). 1 What remains unclear is whether this is a universal social phenomenon or an artifact of a-uent market oriented lifestyle. 2 Also, the question of why peers matter in shaping consumption choices has received little attention in the existing literature. ...
... The second factor complicating identi…cation and estimation of peer in ‡uences is an omitted variables bias. As noted by Grinblatt et al. (2008), in the absence of a perfect set of controls, one cannot validate a peer in ‡uence on consumption by observing that a group of neighbors purchase similar baskets of goods (or spend similar amounts of resources on consumption). Inferences will be biased whenever there are group level unobservables that are correlated with consumption expenditure of all those belonging to the group (i.e., correlated unobservables). ...
... As noted previously, much of the existing research on peer in ‡uences in consumption focuses on developed countries. One of the earliest empirical studies in this literature is that by Grinblatt et al. (2008). Using Finnish data, they provide evidence of endogenous peer e¤ects in automobile purchases. ...
... Appropriate transport infrastructure is thus not only required to make low-carbon travel possible, but can also be a pre-condition for the learning of new mobility preferences. It is likely that this is mediated through peer effects (Grinblatt et al., 2008;Weinberger and Goetzke, 2010, see also . The finding is indicative of the well-established fact that urban form is a key determinant of energy consumption in cities (Newman and Kenworthy, 1999;Seto et al., 2014). ...
... For example, Baranzini et al. (2017) document that Swiss households' decisions to adopt the solar technology are dependent particularly on spatially close and recent installations. Similarly, Grinblatt et al. (2008) finds that the purchases of Fig. 1. Simple microeconomics of a shift towards less polluting consumption. ...
Avoiding unmanageable climate change implies that global greenhouse gas emissions must be reduced rapidly. Carbon prices and technological development are essential to deliver such reductions. Changes in preferences, however, are rarely considered, even though other major socioeconomic transitions – such as those from reducing smoking and drink-driving – have succeeded partly because preferences have changed. This article examines the impact of climate policy-induced changes in consumers’ preferences. We show that low-carbon policies could be better designed if it is recognised that preferences can be endogenous to such policies. For instance, carbon taxes must be adjusted, if they crowd-in or -out social preferences, to achieve a given target. Further, when the urban built environment changes mobility preferences, the value of low-carbon infrastructure investments can be underestimated if such effects are ignored. Third, policy-induced changes in preferences for active travel and plant-based diets could increase the net benefits of the transition to zero emissions.
... Finally, this study contributes to the literature on conspicuous consumption that refers to household behavior on consuming certain goods that have higher price tags but meet their desire to display higher social standing and self-worth (Veblen, 1899;Zinkhan and Prenshaw, 1994;Byrne, 1999). In the conspicuous consumption literature, most analyses have used the socioeconomic standing relative to the reference group, usually neighbors, to be the main driver of consumption (Grinblatt et al., 2008;Charles et al., 2009;Vissing-Jorgensen, 2012;Georgarakos et al., 2014;Bricker et al., 2014;Carr and Jayadev, 2015). There is also strong evidence on how awards could illustrate symbols of social standing and reputation (Frey, 2006). ...
... According to the literature on conspicuous consumption, households consume certain goods that have higher price tags but meet their desire to display higher social standing and self-worth (Veblen, 1899;Zinkhan and Prenshaw, 1994;Byrne, 1999). In this context, lower (perceived) socioeconomic status compared with peers or neighbors is a main driver of consumption primarily because of envy and status-seeking motivations (Grinblatt et al., 2008;Charles et al., 2009;Georgarakos et al., 2014;Bricker et al., 2014). ...
... Finally, this study contributes to the literature on conspicuous consumption that refers to household behavior on consuming certain goods that have higher price tags but meet their desire to display higher social standing and self-worth (Veblen, 1899;Zinkhan and Prenshaw, 1994;Byrne, 1999). In the conspicuous consumption literature, most analyses have used the socioeconomic standing relative to the reference group, usually neighbors, to be the main driver of consumption (Grinblatt et al., 2008;Charles et al., 2009;Vissing-Jorgensen, 2012;Georgarakos et al., 2014;Bricker et al., 2014;Carr and Jayadev, 2015). There is also strong evidence on how awards could illustrate symbols of social standing and reputation (Frey, 2006). ...
... According to the literature on conspicuous consumption, households consume certain goods that have higher price tags but meet their desire to display higher social standing and self-worth (Veblen, 1899;Zinkhan and Prenshaw, 1994;Byrne, 1999). In this context, lower (perceived) socioeconomic status compared with peers or neighbors is a main driver of consumption primarily because of envy and status-seeking motivations (Grinblatt et al., 2008;Charles et al., 2009;Georgarakos et al., 2014;Bricker et al., 2014). ...
Many residential projects that receive publicly recognized awards for their architectural design and are built alongside monotonous public housing in Singapore present a unique opportunity to analyze the economic spillovers of design awards in the multifamily residential context. The difference-in-differences approach is utilized to estimate the design award’s effects on market prices of nearby public housing. Analysis results show that prices fell by 2% for public housing units within a 300-m radius of award-winning residences and sold during the first year after awards were given. In contrast, neither actual completion of award-winning residences nor the completion of non-awarded condominiums with good design led to a significant price change. These results provide suggestive evidence that the dominating channel for negative economic spillovers is winning an award rather than congestion from new residential developments or good design itself. Furthermore, price reduction was significant only for newer public housing units with better design attributes compared to older ones. This suggests that the economic spillover of design awards is negative when surrounding housing units are potentially comparable and substitutional with award-winning residences and have a limited possibility for self-improvement through upgrades or redevelopment. A potential explanation is that envy based on the comparison with a neighboring residence receiving a publicly recognized design award may play an influential role in conspicuous housing consumption.
... We add to the literature by documenting the debt consequences of conspicuous consumption. In measuring conspicuous consumption, most previous studies use relative income to capture the notion that it is motivated by comparisons of perceived socioeconomic standing or race among peers (Grinblatt, Keloharju, and Ikaheimo, 2008;Charles, Hurst, and Roussanov, 2009;Vissing-Jorgensen, 2012;Bricker, Ramcharan, and Krimmel, 2014;Georgarakos, Haliassos, and Pasini, 2014;Carr and Jayadev, 2015). Our study measures conspicuous motivation by exploring the individuals' revealed choices between residential circles that provide similar housing consumption services but differ in perceived status. ...
... 24 Hence, comparisons of socioeconomic standing among peers are most likely to happen in residential circles. Finally, the relative income position of condo residents is expected to be lower in their residential circles than their matched counterparts in HDBs, given that the average income level in condos is much higher than in HDBs, as shown in Table 1. 25 As demonstrated by previous research (Grinblatt, Keloharju, and Ikaheimo, 2008;Charles, Hurst, and Roussanov, 2009;Bricker, Ramcharan, and Krimmel, 2014;Georgarakos, Haliassos, and Pasini, 2014), lower (perceived) own income compared with peers has a significant association with conspicuous consumption and debt. ...
Using a novel, large dataset of consumer transactions in Singapore, we study how conspicuous consumption affects household indebtedness. The coexistence of private housing (condominiums) and subsidized public housing (HDB) allows us to identify conspicuous consumers. Conditional on income and other socioeconomic characteristics, those who choose to reside in condominiums – considered a status good in Singapore – are likely to be more conspicuous than their counterparts living in HDB units. We find that condominium residents spend considerably more (by 25%) on conspicuous goods but not differently on inconspicuous goods. Compared with their matched HDB counterparts, these consumers with higher conspicuous motivation carry 7% more credit card debt and 108% more delinquent credit card debt. Our results suggest that status‐seeking‐induced conspicuous consumption is an important determinant of household indebtedness. This article is protected by copyright. All rights reserved
... 5 And some recent microeconomic evidence suggests that consumption and debt might be shaped by local factors (Coibion et. al (2014), Grinblatt, Keloharju, and Ikaheimo (2008)). 6 However, there remains little direct household level evidence linking household consumption, debt and portfolio decisions, including occupational choice, to status motives driven by the variation in a household's income relative to its close neighbors. ...
... There is evidence that peer effects feature in important economic decisions, and these effects could also be a source of bias (Bertrand, Luttmer and Mullainanthan (1998), Grinblatt, Keloharju, and Ikaheimo (2008)). Households living in areas with more high status cars might also be induced to buy these cars, and to the extent that the percent of high status cars in the local area is correlated with relative household income, this type of peer effect could lead to a spurious association between relative income and status cars. ...
This paper investigates the importance of status in household consumption and financial decisions using household data from the Survey of Consumer Finances (SCF) linked to neighborhood data in the American Community Survey (ACS). We find evidence that a household's income rank—its position in the income distribution relative to its close neighbors—is positively associated with its expenditures on high status cars, its level of indebtedness, as well as the riskiness of the household's portfolio. More aggregate county-level evidence based on a dataset of every new car sold in each county in the United States since 2002 also suggests that the signaling motive might be important. These results indicate that greater income heterogeneity might have large consequences for household consumption and portfolio decisions.
... SNI is a critical determinant of WTB (Hoyer et al., 2008). Grinblatt et al. (2008), for instance, analyzed the automobile purchasing behavior of Finnish consumers. The authors found a positive association between SNI and the purchase of automobiles. ...
... Although the influence of SNI on WTB differs in each one of the abovementioned contexts, the motive is identical (i.e. the desire to conform to group norms). In Grinblatt et al.'s (2008) study, consumers purchased the makes and models owned by their neighbors to show that they too could afford such cars. In Maher and Mady's (2010) study, however, consumers were reluctant to purchase the products made in the offending country because they wanted to demonstrate to their reference groups that they were not acting in defiance of their groups' norms. ...
Purpose
The purpose of this paper is to explore the effects of consumer animosity on conspicuous consumption in two research settings: Israel and Russia. The study also examines: the relationship between susceptibility to norm influence (SNI) and consumer animosity, whether SNI affects consumers’ willingness to buy (WTB) products from a country toward which they harbor animosity, and the relationship between consumer animosity and WTB in contexts differing in the level of animosity harbored toward a target country.
Design/methodology/approach
To probe generalizability, the hypothesized model was tested in two different contexts: Study 1 was conducted in Israel using the context of the Holocaust and Study 2 was conducted in Russia using the context of the recent political discord with the USA. A convenience sample of Israeli-Jewish (n=264) and Russian (n=259) consumers yielded a total of 523 questionnaires.
Findings
In both contexts, the results from the SPSS and AMOS analyses indicated a negative and significant relationship between consumer animosity and conspicuous consumption. Moreover, SNI was positively associated with consumer animosity. Finally, the study findings point to a negative association between consumer animosity and WTB, regardless of the level of animosity.
Originality/value
The research findings suggest that consumer animosity may be a stronger predictor for the consumption of conspicuous products than for the consumption of necessity goods.
... To address this potential concern in the cases of accuracy of perceptions of past returns and of expectations for future returns, Table 4 reports estimates of Heckman regressions of absolute forecast or backcast errors, conditional on the respondent having chosen to form a financial circle. 34 The first-stage regression estimates are reported in columns (a), while the second-stage (forecast or backcast) regressions appear in columns (b), for selected covariates. 35 Table 2 shows that the key finding on absolute forecast errors, namely that social interaction variables play no role once backcast errors are controlled for, is robust to allowing for endogenous formation of the financial circle. ...
... Table 5 presents four bivariate probits. Even-numbered columns depict the choice of whether 34 As a further robustness exercise, Table A9 in the online appendix reports estimates from seemingly unrelated regression (SUR) estimation, where the decision to form a financial circle and errors in perceptions or expectations are allowed to be arbitrarily related, with similar results. 35 Table A3 in the online appendix reports the results for the full list of covariates. ...
Household finances are confidential and discussions are limited to a subset of peers. We collect novel representative survey data to examine separately whether interactions with inner and outer social circles influence return perceptions, expectations, and exposure to a widely known financial instrument in a developed economy with multiple information sources. We find that a respondent’s connectedness, proxied by perceived prevalence of information or participation in the small financial circle, improves expectation accuracy indirectly, through boosting accuracy of perceived past returns; and influences stock participation and exposure not only by influencing expectations, but also directly.
... But at the same time, many have sold their good quality cars in requirement of money during this time. So, after a specific duration, the improved quality preowned cars after extensive servicing were available in the market, attracting the attention of many consumers [2,10]. In India, Maharashtra had the largest share market of preowned cars. ...
The requirement of human beings always brings new concepts and designs to the world. A preowned market is one such important need of the present modern arena. The preowned market has grabbed customers' attention since the trend of exchanging goods without any money was introduced. If we look closely, this concept was initially implemented by the Mughal emperors, which regained attention. There are many reasons this resale market is worthy enough, the best alternative and excellent competition for the new manufacturing units. This preowned market is not only best given economic reasons but also impactful for social and ethical reasons. Among many preowned markets in India, the preowned automobile industry has gained an excellent market in a concise period. The regular transfer of individuals and continuously and drastically changing technology is the primary reason behind the increased preowned automotive market. Another essential reason is expendable income and accessible financial support from various agencies, specifically for pre-owned cars. Considering the rapid increment in the preowned car market, this company analysis article investigates one of the significant trending companies called CARS24 in the preowned car market. This study is based on various surveys and analyses from different customers and showrooms. This analysis also considers the cumulative findings and suggestions to overcome the present problems related to preowned cars.
... Alessie and Kapteyn (1991),Grinblatt et al. (2008), andAlvarez-Cuadrado et al. (2016) are just a few examples of studies testing the relevance of interdependent preferences using household data, while Verhelst and Van den Poel (2014) use European zip code at different levels of product aggregation. 4 Similar considerations apply to the literature investigating the convergence in consumption patterns across different countries such asKónya and Ohashi (2007),Lyons et al. (2009), andMichail (2020). ...
Focusing on EU countries, we analyze the influence of immigration flows on the demand for different aggregate categories of final consumption goods. Using the cross-country heterogeneity in immigration flows and preference structures, we find that when people move from a country to another, the sectoral preferences characterizing the origin country affect the preference structure of the host country. Furthermore, we find evidence that the transmission mechanism is reinforced by both the intensity of the immigration flows and the share of immigrants already living in the host country, suggesting a higher propensity to assimilate different consumption standards in more pluralistic countries. Our contribution is twofold. First, differently from most of the literature that analyzes the supply-side consequences of immigration, this study focuses on the impact of immigration on the demand side at the aggregate level. Second, we show that sectoral consumer preferences, even if elicited only residually, represent aggregate variables that can be transferred across countries.
... In cases of past societal transitions, such as smoking reduction, there is evidence that societies guided the processes of shifting preferences, and values changed along with changing relative prices (Nyborg and Rege 2003;Stuber et al. 2008;Brownell and Warner 2009). Further evidence on changing preferences in consumption choices pertinent to decarbonisation includes Grinblatt et al. (2008) and Weinberger and Goetzke (2010) for mobility; Erb et al. (2016), Muller et al. (2017), and Costa and Johnson (2019) for diets; and Baranzini et al. (2017) for solar panel uptake. If individuals' preferences and values change during a transition to the low-carbon economy, then this overturns conclusions on what count as adequate or even optimal policy responses to climate change mitigation in economics (Jacobsen et al. 2012;Schumacher 2015;Dasgupta et al. 2016; Daube and Ulph 2016;Ulph and Ulph 2021). ...
Chapter 5 (Demand, services and social aspects of mitigation),
explores how mitigation interacts with meeting human needs and access to services. It explores, inter alia: sustainable production and consumption; patterns of development and indicators of wellbeing; the role of culture, social norms, practices and behaviour changes; the sharing economy and circular economy; and policies facilitating behavioural and lifestyle change.
This chapter is part of the Working Group III contribution to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC). Electronic copies of this chapter are available from the IPCC website www.ipcc.ch; and https://www.ipcc.ch/report/ar6/wg3/downloads/report/IPCC_AR6_WGIII_Chapter05.pdf
... There is well-documented evidence of social influence in the purchase of ice cream (Richards et al., 2014), electronic equipment (Narayan et al., 2011), smartphone (Park and Chen, 2007), organic food items (Chen, 2007), and automobile (Grinblatt et al., 2008 social influence into three major outcomes -conformity, compliance, and obedience (Maness et al., 2015). Conformity is the most common social influence that occurs when an individual changes the behavior to gain acceptance in a group or improve social status by impressing others. ...
The recent advancements in communication, digital, and automobile technologies have the potential to revolutionize the transport sector, especially the way we travel. Such advancements include the advent of mobility-on-demand services, electric and connected, and autonomous vehicles (CAVs). Recent research indicates their imminent market penetration, but their widespread consumer adoption is still uncertain because of several anticipated barriers like giving up conventional vehicles, safety concerns, accident liability problems, cybersecurity issues, and many more. A potential consumer’s decision to purchase a vehicle is greatly influenced from information received from multiple sources, especially peer-to-peer communication. To the best of our knowledge, limited studies exist in capturing the impact of peer-to-peer communication on the adoption of CAVs. This dissertation attempts to capture the impact of peer-to-communication in the consumers’ social networks on their likelihood of adopting CAVs.
The dissertation includes four scientific contributions: (i) capturing consumers' likelihood to own CAVs based on their social values, (ii) quantifying consumers' ranking preference towards multiple CAV-based travel modalities based on information received from their peers and advertisements, (iii) developing a novel framework to forecast the adoption of privately owned CAVs through the integration of consumer behavior model in agent-based simulation and (iv) quantifying the impact of multiple information sources on the consumers' decision to purchase a CAV based on their concern towards barriers of CAVs. For analysis, the dissertation utilizes advanced discrete choice modeling (integrated choice and latent variable (ICLV) model as well as latent class analysis) and three survey datasets in Tennessee, including samples of
vii
employees of the University of Memphis (2,449) and the general population of Nashville (1,495), and the entire state of Tennessee (4,448).
The results showed a positive influence of CAV adoption on consumers' social image. Furthermore, consumers prefer CAV-related information received from their peers over media and are more likely to ride in shared-mobility-based CAVs than other CAV-based travel modalities. The results of the consumer behavior model indicate that the adoption of privately owned CAVs increases with a decrease in their purchase price and an increase in community-level adoption. These findings will assist policymakers and automakers in boosting the market penetration of CAVs.
... Also, market penetrations higher than 25 percent show a significant and positive impact on the utility of purchase. Social influence has been identified as a possible factor affecting vehicle ownership and EV adoption (Ghasri et al., 2019, Axsen and Kurani, 2012, Grinblatt et al., 2008. As discussed in the theory of diffusion of innovation (Rogers, 2010), high market penetration of a product can be interpreted as a confirmation from peers about the usefulness of a product, or as discussed in the conformity theory, higher market penetration can create symbolic benefits, therefore increasing the likelihood of purchasing the product (Axsen and Kurani, 2012). ...
... Based on this framework, Alessie and Kapteyn (1991) and Kapteyn et al. (1997) have empirically shown that preference interdependence is an important determinant of consumer expenditure. Since then, a fairly robust stream of research in economics (Bobonis & Finan, 2009;Duarte et al., 2014;Gaviria & Raphael, 2001;Grinblatt et al., 2008;Powell et al., 2005), marketing (Bahri-Ammari et al., 2020;Mainolfi, 2020;Oyedele & Goenner, 2021) and psychology (Kastanakis & Balabanis, 2012;van Herpen et al., 2009) documents that consumers' individual decisions are affected by others' behaviour and choices in many different contexts. ...
This paper studies bandwagon effects in tourism travel decisions. We examine how social influence affects individual decisions (i) to take a vacation trip, and (ii) the choice of destination. We use representative microdata for 28 European countries between 2014 and 2016 involving more than 60,000 individuals. Our empirical model accounts for the potential endogeneity of the social influence effect using a control function approach. Our results show that tourism participation and abroad travelling exhibit bandwagon effects: both are positively influenced by the share of people in the region of residence (NUTS 2) that also travels and that travels abroad. We also find that (i) bandwagon effects are heterogeneous across countries, and (ii) social effects are larger among non-travellers in the previous year.
... Second, learning about route 135 and mode choice 136,137 have been documented as changing transport decisions. Third, peer effects exist for both car purchases 138 and solar panel uptake 139 : a policy that makes a low-carbon good more attractive can change preferences by influencing the social norm. Fourth, in an experimental setting, carbon pricing can also change preferences by crowding out citizens' intrinsic motivation to choose low-carbon products as documented 140 . ...
Mitigation solutions are often evaluated in terms of costs and greenhouse gas reduction potentials, missing out on the consideration of direct effects on human well-being. Here, we systematically assess the mitigation potential of demand-side options categorized into avoid, shift and improve, and their human well-being links. We show that these options, bridging socio-behavioural, infrastructural and technological domains, can reduce counterfactual sectoral emissions by 40–80% in end-use sectors. Based on expert judgement and an extensive literature database, we evaluate 306 combinations of well-being outcomes and demand-side options, finding largely beneficial effects in improvement in well-being (79% positive, 18% neutral and 3% negative), even though we find low confidence on the social dimensions of well-being. Implementing such nuanced solutions is based axiomatically on an understanding of malleable rather than fixed preferences, and procedurally on changing infrastructures and choice architectures. Results demonstrate the high mitigation potential of demand-side mitigation options that are synergistic with well-being. Evaluation of mitigation actions often focuses on cost and overlooks the direct effects on well-being. This work shows demand-side measures have large mitigation potential and beneficial effects on well-being outcomes.
... Also, market penetrations higher than 25 percent show a significant and positive impact on the utility of purchase. Social influence has been identified as a possible factor affecting vehicle ownership and EV adoption (Ghasri et al., 2019, Axsen and Kurani, 2012, Grinblatt et al., 2008. As discussed in the theory of diffusion of innovation (Rogers, 2010), high market penetration of a product can be interpreted as a confirmation from peers about the usefulness of a product, or as discussed in the conformity theory, higher market penetration can create symbolic benefits, therefore increasing the likelihood of purchasing the product (Axsen and Kurani, 2012). ...
Cities globally are moving toward electrified public and private transport. Metropolitan areas are now seeking ways to mitigate emission and are heading towards sustainable ways of using clean/ green energy sources by integrating and implementing new technology and science innovations into the transport systems. This study explores consumer preferences for installing photovoltaic solar cells on electric vehicles. In this paper, we have applied a double hurdle model to account for the low market penetration of electric cars in Australia and dealt with the high non-purchase choice. Data are obtained from nearly 1,900 individuals from eight major cities in Australia to explore consumer preferences regarding electric vehicles with photovoltaic solar cells option. The proposed model specification accounts for the panel impact generated from multiple tasks for each respondent, and the correlation between the two decisions on electric vehicle purchase and selecting the photovoltaic add-on. Furthermore, the systematic taste heterogeneity towards price variables is considered by introducing interactive sociodemographic terms to the utility functions. This study provides insights into the willingness-to-pay values for different features of electric vehicles and the solar panel add-on. The results show on average consumers are willing to pay a premium of $18.13 on purchase price for every daily additional kilometre in driving range generated by solar panels. The average willingness to pay for the solar panel to match the colour of vehicle is $1,021.09 for women, and $1,803.92 for men. This study informs policymakers and industries about the feasibility of such an emerging technology.
... Social influences on human behaviour have typically been studied in the fields of education (Antecol, Eren, & Ozbeklik, 2016;Bifulco, Fletcher, & Ross, 2011;Burdick-Will, 2018;Calvó-Armengol, Patacchini, & Zenou, 2009;Feld & Zölitz, 2017;Fletcher, 2015;Goux & Maurin, 2007;Sacerdote, 2001), alcohol, tobacco or drug usage (Fletcher, 2012;Gaviria & Raphael, 2001;McVicar & Polanski, 2013) and cognitive skill formation (Lavy & Schlosser, 2011). Besides, human behaviour is also affected by income distribution (Galster, Andersson, & Musterd, 2010), consumption patterns (Grinblatt, Keloharju, & Ikäheimo, 2008;Kuhn, Kooreman, Soetevent, & Kapteyn, 2011;Moretti, 2011;Roychowdhury, 2019) and employment decisions (Patacchini, Rosenthal, & Mota, 2016) of their peers or neighbours. We draw methodologically from this literature to estimate our causal neighbourhood effects on domestic violence. ...
We examine the impact of neighbourhood physical domestic violence on the likelihood of being exposed to physical abuse within a household using nationally representative data from the fourth wave of the National Family Health Survey of India. To address potential endogeneity issues in analysing neighbourhood influences, we utilise an instrumental variables approach that compares households in the same state but different neighbourhoods. Using exogenous variation in neighbouring women’s exposure to parental violence in her natal family as an instrument for average neighbourhood domestic violence, we find that a 1 standard deviation increase in neighbourhood domestic violence leads to a 0.2 standard deviation increase in the probability of domestic violence within a household. We establish that domestic violence is not only driven by intra-household factors but also observable changes at a neighbourhood level.
... There is well-documented evidence of social influence in the purchase of ice cream (Richards et al., 2014), electronic equipment (Narayan et al., 2011), smartphone (Park and Chen, 2007), organic food items (Chen, 2007), and automobile (Grinblatt et al., 2008). The literature classifies social influence into three major outcomes -conformity, compliance, and obedience (Maness et al., 2015). ...
Due to the unavailability of prototypes, the early adopters of novel products actively seek information from multiple sources (e.g., media and social networks) to minimize the potential risk. The existing behavior models not only fail to capture the information propagation within the individual's social network, but also they do not incorporate the impact of such word-of-mouth (WOM) dissemination on the consumer's risk preferences. Moreover, even cutting-edge forecasting models rely on crude/synthetic consumer behavior models. We propose a general framework to forecast the adoption of novel products by developing a new consumer behavior model and integrating it into a population-level agent-based model. Specifically, we extend the hybrid choice model to estimate consumer behavior, which incorporates social network effects and interplay between WOM and risk aversion. The calibrated consumer behavior model and synthetic population are passed through the agent-based model for forecasting the product market share. We apply the proposed framework to forecast the adoption of autonomous vehicles (AVs) in Nashville, USA. The consumer behavior model is calibrated with a stated preference survey data of 1,495 Nashville residents. The output of the agent-based model provides the effect of the purchase price, post-purchase satisfaction, and safety measures/regulations on the forecasted AV market share. With an annual AV price reduction of 5% at the initial purchase price of $40,000 and 90% of satisfied adopters, AVs are forecasted to attain around 85% market share in thirty years. These findings are crucial for policymakers to develop infrastructure plans and manufacturers to conduct an after-sales cost-benefit analysis.
... Maness et al. (2015) provided comprehensive literature reviews on the DCMs of social influence in travel behavior research. Previous transportation studies (Grinblatt et al., 2008;Goetzke and Andrade, 2010;Sidharthan and Bhat, 2012) employed weighted interactions using spatial distances or distance ranks, although these interactions were not asymmetric. Soetevent and Kooreman (2007) and Deutsch and Goulias (2013) suggested the existence of an asymmetric interaction by showing that the decision-making role of an individual can differ vastly across various social engagement types, e.g., her/his position in their social network. ...
This paper examines how social interaction affects the choice to evacuate during a network formation process. The primary objective is to evaluate in detail the influence of other individuals by considering how influencers and entire network structures affect one-to-one interactions. This study proposes an analytical framework for the simultaneous evaluation of local interaction and face-to-face communication network formation. This framework is appropriate for dynamic scenarios, because local interactions strongly influence human decision-making and because network formation changes over time. Our detailed local interaction model, which is based on Brock and Durlauf (2001), analyzes the differences in the interaction weights related to pairs and behaviors. We estimate the utility and the asymmetric weight parameters in the local interaction model by using the nested pseudo-likelihood approach. Our proposed network formation model, which is based on the discrete choice model, evaluates the probability of face-to-face communication and the spatial correlations of the interaction pairs in an area. Our case study validates the introduction of (1) asymmetric weights of interaction in the evacuation departure choice and (2) spatial correlation in the network formation model, using the behavioral data collected during a no-notice disaster in a devastated settlement. In numerical simulations, the proposed evaluation framework can effectively illustrate the impact of network structures on the choice probabilities influenced by interactions. Additionally, the framework is useful for evaluating the critical measures for prompt evacuation.
... That visible behavior affects peers has been confirmed for various types of consumption decisions with considerable mitigation potential (Wynes and Nicholas, 2017), such as energy consumption (Allcott, 2011;Ferraro et al., 2011;Allcott and Rogers, 2014), adoption of renewable energy technologies (Ozaki, 2011;Bollinger and Gillingham, 2012;Inhoffen et al., 2019), and choice of transportation mode (Bamberg et al., 2007;Grinblatt et al., 2008;Abou-Zeid et al., 2013;Pike and Lubell, 2018). For instance, Allcott (2011) show that agents decrease their consumption of energy when they receive information about the consumption of similar neighbors. ...
We analyze the effectiveness of environmental policy when consumers are subject to social influence. To this end, we build a model of consumption decisions driven by socially-embedded preferences formed under the influence of peers in a social network. This setting gives rise to a social multiplier of environmental policy. In an application to climate change, we derive Pigouvian and target-achieving carbon taxes under socially-embedded preferences. Under realistic assumptions the social multiplier is equal to 1.30, allowing to reduce the effective tax by 38%. We show that the multiplier depends on four factors: strength of social influence, initial taste distribution, network topology and income distribution. The approach provides a basis for rigorously analyzing a transition to low-carbon lifestyles and identifying complementary information and network policies to maximize the effectiveness of carbon taxation.
... Third, testing the effects of FOMO-laden appeals on purchase behavior extended previous research (Hodkinson, 2016). The ability of close friends or family members to induce consumption-changing anxiety about 'missing out' follows from social comparison research, such as parents comparing their food choices for their children to similar choices by other parents (Baldassarre, Campo, & Falcone, 2016), spouses comparing their purchases for their partners to purchases by other couples (Shweta & Dhyani, 2016), and neighbors comparing their automobile purchases (Grinblatt, Keloharju, & Ikäheimo, 2008). ...
‘Fear of missing out’ (FOMO) is a recent but widely recognized phenomenon. Some emotional antecedents of FOMO, such as anticipated elation and anticipated envy from other people, can boost FOMO. Other emotional antecedents, such as comforting rationalizations, can decrease FOMO. Because FOMO can influence consumers’ experience-related attitudes and behaviors meaningfully, it behooves marketing scholars and practitioners to understand FOMO and the potential of FOMO-laden appeals to increase sales. Although social scientists generally treat FOMO as a personality trait, FOMO-laden appeals that extol the future experiences of close friends or family members can induce a FOMO spike.
... Several studies find that social comparison influences consumption. In the field, Kuhn et al. (2011) find that the likelihood of buying a new car increases if someone in the neighborhood has recently bought a new car (see also Grinblatt et al., 2008). Even poor, rural villagers make consumption decisions that are in line with the decisions of those that they observe (Grohmann and Sakha, 2019). ...
A number of studies show that there is a link between social comparison and high levels of household debt. However, the exact mechanisms behind this link are not yet well understood. In this paper, we perform a lab experiment designed to study the effects of social image concerns and peer information on consumption choices that can be financed through debt taking. We find that having to announce one's consumption decision publicly leads to leaving money on the table, which is the opposite of what we expected. Being informed about other participants' choices leads to conformity in choices between participants.
... Dupor and Liu (2003) argue that social influence, and in particular jealously, can be related to overconsumption. Grinblatt et al. (2008) also find evidence of a social influence in the decision to buy an automobile. However, they conclude that there is little evidence that emotional biases, like envy, account for the observed social influence on consumption. ...
Using a sample of around 30 countries over the period 2001-2015, this study provides evidence that deeply rooted cultural differences are significantly associated with the use of mortgage debt. More detailed, we find that power distance and uncertainty avoidance have a negative impact on the value of the total outstanding residential loans to GDP. This finding is robust across various specifications and the use of alternative measures of mortgage debt. In contrast, trust has a positive and robust impact on all the measures of mortgage debt. Other dimensions of national culture like long-term orientation, individualism, and indulgence, also appear to matter; however, their impact depends on the control variables and the employed measure of mortgage debt.
... Our line of argumentation is embedded in the general literature on the role of proximity for peer effects, communication patterns, and knowledge flows (e.g., Bulte and Moenaert 1998;Glaeser and Sacerdote 2000;Grinblatt et al. 2008;Bandiera et al. 2010;Nanda and Sorenson 2010). There is also a burgeoning strand of literature investigating social network formation in the university context (e.g., Sacerdote 2001;Zimmerman 2003;Mayer and Puller 2008;Marmaros and Sacerdote 2006). ...
Over the past decades, entrepreneurial activity has started to be considered a third mission of higher education institutions. Our study examines the extent to which entrepreneurship at universities is driven by spatial proximity between university faculties. To this end, we use a new dataset that links information on business idea generation by faculties of German universities between 2007 and 2014 with comprehensive data on structural characteristics of these universities and faculties (e.g., number of academic staff, students, industry funding). Our analysis shows that the emergence of entrepreneurial ideas in natural sciences is positively affected by proximity to business schools. This pattern suggests the presence of knowledge flows between these two types of university faculties as an important source of science-based and technology-oriented business ideas. We do not find such a relationship between proximity to business schools and other faculties.
... These studies have found that the income distribution has a relatively small e↵ect on visible spending. Other studies have started to shed light on important issues such as the extent to which di↵erent goods and services are visible to peers (Solnick and Hemenway, 2005), how the visibility of goods a↵ects income elasticities (He↵etz, 2011;Roth, 2014), how geographical proximity plays a role in visible spending (Grinblatt et al., 2008) and how household spending on visible goods is a↵ected by business cycles (Kamakura and Du, 2012). ...
Using South African household expenditure data, we analyze how the spending of a household on visible goods, such as jewelry and clothes, depends on the distribution of income within its social group. We find that this spending is positively correlated with the share of peers who possess a similar income level to the household, what we dub the “local income share.” Moreover, we find that the spending of a household on visible goods is positively correlated with the average income of peers that are poorer than this household. We interpret this as evidence for cascade effects through which income changes among the poorest in the social group can trigger adjustments in the visible spending patterns of the wealthy. In line with previous research (Charles et al. 2009), we also find that visible spending of a household is negatively correlated with the average income of its social group. We present a simple model of status competition based on Hopkins and Kornienko (2004) that synthesizes these effects and can account for our results. (JEL D12, D31, O12)
... These studies have found that the income distribution has a relatively small e↵ect on visible spending. Other studies have started to shed light on important issues such as the extent to which di↵erent goods and services are visible to peers (Solnick and Hemenway, 2005), how the visibility of goods a↵ects income elasticities (He↵etz, 2011;Roth, 2014), how geographical proximity plays a role in visible spending (Grinblatt et al., 2008) and how household spending on visible goods is a↵ected by business cycles (Kamakura and Du, 2012). ...
Using South African household expenditure data, we analyze how the spending of a household on visible goods, such as jewellery and clothes, depends on the distribution of income within its social group. We find that this spending is positively correlated with the share of peers who posses a similar income level to the household , what we dub the 'local income share'. Moreover, we find that the spending of a household on visible goods is positively correlated with the average income of peers that are poorer than this household. We interpret this as evidence for cascade effects through which income changes among the poorest in the social group can trigger adjustments in the visible spending patterns of the wealthy. In line with previous research (Charles et al., 2009), we also find that visible spending of a household is negatively correlated with the average income of its social group. We present a simple model of status competition based on Hopkins and Kornienko (2004) that synthesizes these effects and can account for our results.
... Moreover, even apart from considerations of marketing and product availability, there is substantial evidence that there are social effects of consumption decisions that will, in aggregate, multiply the effect of individual choices. Social scientists have identified mechanisms through which conspicuous or visible consumption choices influence the choices of peers (Grinblatt et al. 2008). These effects are especially pronounced for choices where consumers are uncertain, and thus make consumption decisions by Bfollowing^peers (Banerjee 1992;Bikhchandani et al. 1992). ...
When consumers choose to abstain from purchasing meat they face some uncertainty about whether their decisions will have an impact on the number of animals raised and killed. Ethicists have argued that this uncertainty should not dissuade consumers from a vegetarian diet because the “expected” impact, or average impact, will be predictable. Recently, however, scholars have argued that the expected marginal impact of a consumer change is likely to be much smaller or more radically unpredictable than previously thought. We argue first that these “causal inefficacy” arguments are theoretically valid, but in practice depend on inaccurate descriptions of the economy. Second, we argue that, over the long run, the response of animal producers will be far more substantial and predictable than the literature suggests. Our case rests on three economic observations: (i) animal producers operate in a highly competitive environment, (ii) complex supply chains efficiently communicate some information about product demand, and (iii) consumers of plant-based meat alternatives have positive consumption spillover effects on other consumers. We argue, therefore, that there is a clear consequentialist case for abstention from animal consumption.
... The decision-making process related to consumption practices was also found to be more inclined to a group's values, attitudes, or beliefs (Schiffman & Kanuk, 2003). Extant literature on social influence, consumer behavior, and decision making support the claim that consumers are highly susceptible to direct and indirect pressure from real or imagined others, such as peers, family members, and neighbors (Argo, Dahl, & Manchanda, 2005;Childers & Rao, 1992;Cotte & Wood, 2004;Grinblatt, Keloharju, & Ik€ aheimo, 2008). This inclination was stronger when their purchases enhanced their perceived affiliation to a valued group to avoid feelings of social exclusion (Duclos, Wang, & Jiang, 2013;Mead, Baumeister, Stillman, Rawn, & Vohs, 2011). ...
The purpose of this article is to explore consumption-related decisions of urban poor families. Using a combination of in-depth interviews and visual narrative exercise, stories of six urban poor families living in Payatas, Quezon City, were analyzed. Key findings show that consumption-related decisions of participants follow a double cyclic narrative of just right spending. Community shared practices enable participants to survive by managing tensions between making ends meet and sustaining a public ideal of living a simple life. The researchers provide reflections on the socio-economic reproduction of a public ideal and rethinking the role of psychology in poverty reduction policies.
... For the intensive margin decision, the expectational error terms of Huber-robust regressions of expectations conditional on perceptions are found to be valid and predictive instruments, but no statistical evidence against the null of exogeneity is found and coe¢ cients are bigger but imprecisely estimated. 37 More fundamentally, however, we doubt that going down the route of further experimentation with possible instruments is fruitful, since a number of considerations make it unlikely that reverse causality lies behind our results, when these are seen in context. First, one could make the same reverse causality argument about perceptions regarding the entire population: those who hold stocks want to feel that they are not alone, not only in their …nancial circle but also more broadly. ...
Household finances are confidential and discussions are limited to a subset of peers. We collect novel representative survey data to examine separately whether interactions with inner and outer social circles influence return perceptions, expectations, and exposure to a widely known financial instrument in a developed economy with multiple information sources. We find that perceived prevalence of information or participation in the small financial circle improves expectation accuracy by boosting accuracy of perceived past returns; and influences stock participation and exposure not only through expectations, but also directly. We find little evidence of mindless imitation of the outer social circle in stockholding.
... Targeting however, raises ethical questions. Because social pressure drives purchase behavior of products (e.g., Grinblatt, Keloharju, and Ikäheimo 2008), should marketers extend strategies to include social pressures related to relationships? What are the ethical implications of applying social pressure to those mentally and physically taxed with combatting a medical condition? ...
The use of social relationships as a promotional tool in direct-to-consumer (DTC) advertising has received limited attention despite relational impacts on illnesses and empirical evidence supporting social relationships’ positive influence with some patients. This content analysis provides insights into social relationship appeals’ use in DTC magazine ads for each drug-class category. Further, the current study introduces the concept of social anxiety appeals into the DTC advertising literature, which had previously focused more on fear appeals, such as the fear of pain. Social relationships appeared in 42.5% of the 421 DTC ads included in the sample. Social anxiety appeals appeared in 28.5% of ads with social relationships. Types of social relationships depicted (nonromantic, romantic, non-human pets or cartoon characters, and family) vary across drug-class categories. The current study affirms that DTC advertisers frequently appeal to the theoretical importance of relationships as an aid to improved health. It also raises ethical issues when neither the implied improvements in relationships nor decreased social anxiety are direct consequences of prescribed use of the advertised pharmaceutical.
Reprints available at:
https://www.tandfonline.com/eprint/67varW7UVRz88TAHyZKd/full
... For instance, those that claim they do not care but somehow position themselves as either worst off or better off than their neighbors. This is consistent with other findings such as Grinblatt et al. (2008) who finds that neighbor purchases do influence a consumer's purchasing decision. ...
This study is motivated by the growing concern with the increase in the level of household debt, particularly in Malaysia. One of the debated issues is whether household borrowings are related to poverty factors or due to psychological factors. This study approaches this issue by taking into account the factors as proposed by conventional (Life Cycle Hypothesis) and heterodox (Relative Income Hypothesis) economic theories. The data presented is micro level data collected from a self- administered survey among urban working class in Klang Valley. We find no conclusive evidence supporting the conventional theory, since though age is statistically significant, yet future income expectations are not. The findings also suggested that household debt is not a poverty related phenomenon since the determinants are more “wants” rather than “needs”. Thus, any policy intervention should include educating households on rational consumption decision making.
... More broadly, the paper is a contribution to the existing literature on envy, which includes work in a number of sciences ( Fliessbach et al., 2007;Takashi et al., 2009;Swencioncis & Fiske, 2014) and social psychology ( Buss et al., 1992;Parks, Rumble, & Posey 2002;Smith & Kim 2007;Van De Ven, Zeelenberg, & Pieters, 2010;Hill, DelPriore, & Vaughan, 2011;Lange & Crusius, 2015). Research by economists includes Varian (1974), Kirchsteiger (1994), Mui (1995), Feldman & Kirman (1974), Grinblatt, Keloharju & Ikaheimo (2008), Chen & Li (2009) and Winkelmann (2012). A related set of studies also examines the empirical association between dispositional envy and individual mental health outcomes. ...
Nearly 100 years ago, the philosopher and mathematician Bertrand Russell warned of the social dangers of widespread envy. One view of modern society is that it is systematically developing a set of institutions -- such as social media and new forms of advertising -- that make people feel inadequate and envious of others. If so, how might that be influencing the psychological health of our citizens? This paper reports the first large-scale longitudinal research into envy and its possible repercussions. The paper studies 18,000 randomly selected individuals over the years 2005, 2009, and 2013. Using measures of SF-36 mental health and psychological well-being, four main conclusions emerge. First, the young are especially susceptible. Levels of envy fall as people grow older. This longitudinal finding is consistent with a cross-sectional pattern noted recently by Nicole E. Henniger and Christine R. Harris, and with the theory of socioemotional regulation suggested by scholars such as Laura L. Carstensen. Second, using fixed-effects equations and prospective analysis, the analysis reveals that envy today is a powerful predictor of worse SF-36 mental health and well-being in the future. A change from the lowest to the highest level of envy, for example, is associated with a worsening of SF-36 mental health by approximately half a standard deviation (p < .001). Third, no evidence is found for the idea that envy acts as a useful motivator. Greater envy is associated with slower -- not higher -- growth of psychological well-being in the future. Nor is envy a predictor of later economic success. Fourth, the longitudinal decline of envy leaves unaltered a U-shaped age pattern of well-being from age 20 to age 70. These results are consistent with the idea that society should be concerned about institutions that stimulate large-scale envy.
... Banerjee et al. (2013) consider a novel micro…nance program and replace the unconditional individual probability of participation by the individual probability of participa-tion conditional on individual information sourced from friends. Once informed, they …nd that an agent's decision to participate in the program is not signi…cantly in ‡uenced by the fraction of her friends participating, concluding that the in ‡uence of peer participation is mainly an information e¤ect.31 It is possible to construct an extreme interpretation of their …ndings that would be in con ‡ict with ours. ...
We design, field and exploit novel survey data, from a representative sample of the French population in December 2014 and May 2015 to provide insights on whether social interactions are informative for households' financial decisions. In particular, we examine the extent to which peers with whom respondents discuss financial matters are themselves informed about or participate in the stock market, and whether they encourage mindless imitation of perceived stock market participation. We provide a model in which purely informative social interactions influence both subjective expectations of future stock market returns and directly demand for investing in stocks, and find strong support for the presence of informative social interactions. How much a respondent's financial circle is informed about or participates in stockholding appears to influence perceptions of recent stock returns and, through them, expectations of future returns. Controlling for subjective expectations, both stock market participation and the conditional portfolio share are positively influenced by the extent to which the financial circle of a respondent is informed about or participating in the stock market. Alongside the informative social interactions of respondents with their financial circle, we also find some evidence of mindless imitation of stock market participation via their outer social circle. Our findings suggest that informative social interactions are significant and create a social multiplier for financial education and information, even though the potential for mindless imitation is also present.
... People rely on the opinion and behaviour of others around them to communicate not only the acceptability of owning particular vehicles but also to signal reliability and quality which is particularly relevant for vehicles with new fuel or body types (Adjemian et al., 2010;Gaker et al., 2010;Heutel and Muehlegger, 2010;Wiedmann et al., 2011). People especially rely on the opinion and behaviour of those within close social networks including friends, family, neighbours, and work colleagues (Adjemian et al., 2010;Aini et al., 2013;Axsen et al., 2013;Grinblatt et al., 2008;McShane et al., 2012). These social influences apply equally to purchases of conventional vehicles (CVs) and alternative fuel vehicles (AFVs) (Pettifor et al., 2017) Consumer choice is also shaped by broader social beliefs and value systems that prevail within a given culture. ...
We present a unique and transparent approach for incorporating social influence effects into global integrated assessment models used to analyse climate change mitigation. We draw conceptually on Rogers (2003) diffusion of innovations, introducing heterogeneous and interconnected consumers who vary in their aversion to new technologies. Focussing on vehicle choice, we conduct novel empirical research to parameterise consumer risk aversion and how this is shaped by social and cultural influences. We find robust evidence for social influence effects, and variation between countries as a function of cultural differences. We then formulate an approach to modelling social influence which is implementable in both simulation and optimisation-type models. We use two global integrated assessment models (IMAGE and MESSAGE) to analyse four scenarios that introduce social influence and cultural differences between regions. These scenarios allow us to explore the interactions between consumer preferences and social influence. We find that incorporating social influence effects into global models accelerates the early deployment of electric vehicles and stimulates more widespread deployment across adopter groups. Incorporating cultural variation leads to significant differences in deployment between culturally divergent regions such as the USA and China. Our analysis significantly extends the ability of global integrated assessment models to provide policy-relevant analysis grounded in real world processes.
... A possible explanation can be the social influence in sports clubs. Previous studies have shown that social influence has a significant effect on consumption [66,67]. For example, the purchase of a sports watch by a fellow club member makes it more likely that another sports club member will purchase the same brand and model within a reasonable amount of time. ...
Individual and unorganized sports with a health-related focus, such as recreational running, have grown extensively in the last decade. Consistent with this development, there has been an exponential increase in the availability and use of electronic monitoring devices such as smartphone applications (apps) and sports watches. These electronic devices could provide support and monitoring for unorganized runners, who have no access to professional trainers and coaches. The purpose of this paper is to gain insight into the characteristics of event runners who use running-related apps and sports watches. This knowledge is useful from research, design, and marketing perspectives to adequately address unorganized runners’ needs, and to support them in healthy and sustainable running through personalized technology. Data used in this study are drawn from the standardized online Eindhoven Running Survey 2014 (ERS14). In total, 2,172 participants in the Half Marathon Eindhoven 2014 completed the questionnaire (a response rate of 40.0%). Binary logistic regressions were used to analyze the impact of socio-demographic variables, running-related variables, and psychographic characteristics on the use of running-related apps and sports watches. Next, consumer profiles were identified. The results indicate that the use of monitoring devices is affected by socio-demographics as well as sports-related and psychographic variables, and this relationship depends on the type of monitoring device. Therefore, distinctive consumer profiles have been developed to provide a tool for designers and manufacturers of electronic running-related devices to better target (unorganized) runners’ needs through personalized and differentiated approaches. Apps are more likely to be used by younger, less experienced and involved runners. Hence, apps have the potential to target this group of novice, less trained, and unorganized runners. In contrast, sports watches are more likely to be used by a different group of runners, older and more experienced runners with higher involvement. Although apps and sports watches may potentially promote and stimulate sports participation, these electronic devices do require a more differentiated approach to target specific needs of runners. Considerable efforts in terms of personalization and tailoring have to be made to develop the full potential of these electronic devices as drivers for healthy and sustainable sports participation.
... Peer influence occurs when people's opinions and behaviors are affected by peers, and is prevalent in large-scaled social networks, leading to social contagion through the paths of linked individuals. A large body of literature has documented the impact of peer influence on agents' economic decisions, including product consumption [4], [5]; technology adoption and innovation diffusion [6]- [11]; online content generation and diffusion [11]- [13]; use of social networking sites [14]; and so forth. ...
... Relying on the neighborhood-fixed effects, I am implicitly making the assumption that properties located in the same neighborhood sold in the same year are comparable in all characteristics, observable and unobservable, other than their exposure to nearby restaurants ( Bayer et al., 2008 ;Grinblatt et al., 2008 ;Campbell et al., 2011 ). ...
The possibility that local consumption amenities provided by bars, restaurants, and other retail services improve neighborhood or city attractiveness has received increasing attention in the literature. Empirical research thus far has focused on the number of establishments in an area. This paper proposes and tests a method for differentiating consumption amenities along a quality dimension, based on either consumer ratings or price estimates from Yelp.com. Appealing to the implicit market model of Rosen (1974), consumption amenity is capitalized in the value of nearby housing. The results demonstrate that both the quantity and quality aspects of consumption amenities matter, and that consumer ratings are more informative about unobservable restaurant amenity than price estimates. Furthermore, comparisons between the results for the pre- and post-Yelp periods show that such capitalization differentials are more significant when information on quality is readily available to and widely used by the public. The method used in this paper to measure the quality of consumption amenities could be applied to other private retail businesses or even local public goods.
... For instance, Bagwell and Bernheim (1996) examine under what circumstances 'Veblen effects' arise from the desire to achieve social status by signalling wealth through conspicuous consumption; Leibenstein (1950) and Corneo and Jeanne (1997) show how signalling value depends on whether consumer behaviour is characterised by snobbism or conformism. Other studies provide empirical evidence on how different factors affect conspicuous consumption such as status (Chao and Schor, 1998), globalisation (Dholakia and Talukdar, 2004), mating motivation and sexual signaling (Griskevicius et al., 2007;Sundie et al., 2011), geographical proximity (Grinblatt et al., 2008), race (Charles et al., 2009), self-esteem (Truong and McCol, 2011), social class (Khamis et al., 2012) and spirituality (Stillman et al., 2012). ...
This study empirically explores the following issue: Does corruption fuel conspicuous consumption? It examines the existence and magnitude of any potential corruption-effect on conspicuous consumption expenditure. Regression analyses of an unbalanced panel data for 20 OECD countries between 2004 and 2010 indicate that luxury car sales are higher by 191 per cent in a country with a high perceived corruption level, for example, CPI score of 4.5, as compared to a country with a low perceived corruption level, for example, CPI score of 9.0, ceteris paribus.
JEL Classification: D12; D73
... We suspect that this distinction (negative-zero) would drive the existence of a negative effect of CSA information for the former, but a null effect for the latter. Moreover, there may be other ways for customers to reduce uncertainty regarding product fit, such as looking to role models, expert opinions, or geographic and/or group membership (Godes and Ofek 2004, Bell and Song 2007, Grinblatt et al. 2008, Duflo and Saez 2003. Inclusion of such information may potentially lead to somewhat different interactions. ...
Most new-product frameworks in marketing and economics, as well as lay beliefs and practices, hold that the larger the stock of adoption of a new product, the greater the likelihood of additional adoption. Less is known about the underlying mechanisms as well as the conditions under which this central assumption holds. We use a series of field and consequential choice experiments to demonstrate the existence of nonpositive and even negative effects of large adoption stock information on the likelihood of subsequent adoption. The results highlight the degree of homophily with the adopting stock as well as the level of customer uncertainty as key characteristics determining the nature of the effect of stock information. In particular, information about a large existing adoption stock generates a positive effect on adoption only under moderate customer uncertainty combined with sufficient homophily; in other levels of uncertainty and/or homophily we find effects ranging from null to negative. This is the first direct test and demonstration of the intricate role of information about a large stock of adoption in the new product diffusion process, and it carries direct implications for marketers.
Data and the online appendix are available at https://doi.org/10.1287/mksc.2016.1011
We examine how the peer effects arising not only from the leading firm but also from a slightly better performing firm affect the capital structure decisions of a firm. There is a large body of literature documenting the importance of peer effects, but it is unclear whether managers pay close attention to activities of slightly better performers. This study uses both book‐ and market‐value based approaches to estimate the peer effect measures. Our analysis shows that: (1) our peer effect measures induce the convergence of the follower firms' capital structure towards better performing firms; and (2) the capital structure converges more towards a slightly better performer.
Neighborhood peer effects have been shown to affect households publicly observable decisions, but how they affect private decisions, like mortgage refinancing, remains unclear. Using precisely geolocated data and a nearest-neighbor research design, we find that households are 7% more likely to refinance if a neighbor within 50 meters has recently refinanced. Consistent with a word-of-mouth mechanism, social influence effects are stronger when neighbors live especially nearby, weaker when owners are non-occupants, and stronger when neighbors and owners are of the same race. Our results suggest an important role for neighborhood peer effects in explaining regional variation in refinancing activity.
Climate mitigation solutions are often evaluated in terms of their costs and potentials. This accounting, however, shortcuts a comprehensive evaluation of how climate solutions affect human well-being, which, at best, may only be crudely related to cost considerations. Here, we systematically list key sectoral mitigation options on the demand side, and categorize them into avoid, shift and improve categories. We show that these options, bridging socio-behavioral, infrastructural and technological domains, can reduce counterfactual sectoral emissions by 50-80% in end use sectors. Based on expert judgement and literature survey, we then evaluate 324 combinations of wellbeing outcomes and demand side options. We find that these are largely beneficial in improving wellbeing across all measures combined (76% have positive, 22% neutral, and 2.4% have negative effects), even though confidence level is low in the social dimensions of wellbeing. Implementing demand-side solution requires i) an understanding of malleable not fixed preferences, ii) consistently measuring and evaluating constituents of wellbeing, and iii) addressing concerns of incumbents in supply-side industries. Our results shift the emphasis in the climate mitigation solution space from supply-side technologies to demand-side service provision.
The public yield spreads of bonds vary widely between Chinese provinces/municipalities, with the average for the highest province double that of the lowest one. Although we find that these patterns are mainly attributable to economic and legal conditions, locational effects like geographic distance and public firm credit ratings also appear to be contributory. We show that these effects are induced by different regional informational environments and are robust to controlling for potential endogenous location choices.
The transition to electric vehicles is an important strategy for reducing greenhouse gas emissions from passenger cars. Modelling future pathways helps identify critical drivers and uncertainties. Global integrated assessment models (IAMs) have been used extensively to analyse climate mitigation policy. IAMs emphasise technological change processes but are largely silent on important social and behavioural dimensions to future technological transitions. Here, we develop a novel conceptual framing and empirical evidence base on social learning processes relevant for vehicle adoption. We then implement this formulation of social learning in IMAGE, a widely-used global IAM. We apply this new modelling approach to analyse how technological learning and social learning interact to influence electric vehicle transition dynamics. We find that technological learning and social learning processes can be mutually reinforcing. Increased electric vehicle market shares can induce technological learning which reduces technology costs while social learning stimulates diffusion from early adopters to more risk-averse adopter groups. In this way, both types of learning process interact to stimulate each other. In the absence of social learning, however, the perceived risks of electric vehicle adoption among later-adopting groups remains prohibitively high. In the absence of technological learning, electric vehicles remain relatively expensive and therefore is only an attractive choice for early adopters. This first-of-its-kind model formulation of both social and technological learning is a significant contribution to improving the behavioural realism of global IAMs. Applying this new modelling approach emphasises the importance of market heterogeneity, real-world consumer decision-making, and social dynamics as well as technology parameters, to understand climate mitigation potentials.
This paper investigates the social endogenous effect linking the employment probability of young workers entering the labour market to the local employment rate. We focus on the transition from school to work, using a representative sample of youths leaving the French educational system in 1998 and 2004. We identify the causal effect of local employment rate using a neighbourhood fixed-effect strategy (Bayer et al. (2007)). We provide evidence that the within-neighbourhood random allocation assumption is likely to hold. The results show that an individual's own employment is strongly affected by the share of working people in their neighbourhood, estimates being higher for high-school dropouts. Results also reveal gender differences, suggesting that young people are more sensitive to same-sex neighbours.
This paper studies the implications of interdependent preferences for investors’ portfolios and the dynamics of asset prices. Individual preferences are interdependent because they depend on other people's consumption and, thus, change over time. In equilibrium, investors herd and hold the same portfolio of risky assets, which is biased toward stocks of sectors that produce a socially preferred good. Price-dividend ratios, expected returns, and return volatility are time-varying, and their dynamics are directly linked to changes in preferences. These results hold even in economies with very simple ingredients, such as logarithmic preferences, and are in stark contrast with those obtained in standard models where preferences are not interdependent.
This paper uses a dataset from a leading American subprime lender, which contains detailed information on borrower and loan characteristics. We find that financial professionals are less likely to become delinquent. This effect cannot be explained by borrower characteristics, such as income, education, loan terms, property characteristics, geographic effects, or strategic default. We also find variation in the effect of working in a financial profession across borrowers of different ages and income levels. We discuss explanations for these results.
Newman and Staelin (1971) point to a lack of research addressing the important questions of "How long are buyers 'in process' on their purchasing decisions?" and "What factors are related to differences in decision time?" Unfortunately, very little attention has been paid to this important research area during the more than two decades following Newman and Staelin's work. Accordingly, the authors develop a theory of the evolution of choice decisions for consumer durable products. This theory addresses information acquisition behavior and the duration of the purchase deliberation process itself. From this general theory, hypotheses pertaining to the duration of the deliberation process are tested using new car purchase survey data.
An informational cascade occurs when it is optimal for an individual, having observed the actions of those ahead of him, to follow the behavior of the preceding individual with regard to his own information. The authors argue that localized conformity of behavior and the fragility of mass behaviors can be explained by informational cascades. Copyright 1992 by University of Chicago Press.
Individuals or households often have some scope for choice of peer groups, whether through the selection of neighborhood of residence, school, or friends. This study addresses the estimation of peer group effects in cases in which measures of peer group influence are potentially endogenous variables. Using a rich data set on individual behavior, the paper explores teenage pregnancy and school dropout behavior. For both cases, the estimation of a straightforward single-equation model yields statistically significant peer group effects; however, these effects disappear under simultaneous equation estimation. The results are robust and suggest the need for careful modeling of the choice of peer groups. Copyright 1992 by University of Chicago Press.
In this paper we examine the importance of local spillovers--such as network externalities and learning from others--in the diffusion of home computers. We use data on 110,000 U.S. households in 1997. Controlling for many individual characteristics, we find that people are more likely to buy their first home computer in areas where a high fraction of households already own computers or when a large share of their friends and family own computers. Further results suggest that these patterns are unlikely to be explained by common unobserved traits or by area features. When looked at in more detail, the spillovers appear to come from experienced and intensive computer users. They are not associated with the use of any particular type of software but do seem to be highly tied to the use of e-mail and the Internet, consistent with computers being part of an information or communication network. Copyright 2002 by the University of Chicago.
Consumer perceptions of reference group influence on product and brand decisions were examined using 645 members of a consumer panel and 151 respondents in a followup study. Differences for 16 products in informational, value expressive, and utilitarian influence were investigated in a nested repeated measures design. The results support hypothesized differences in reference group influence between publicly and privately consumed products and luxuries and necessities.
We examine how people form social networks among their peers. We use a unique data set that tells us the volume of email between
any two people in the sample. The data are from students and recent graduates of Dartmouth College. First-year students interact
with peers in their immediate proximity and form long-term friendships with a subset of these people. This result is consistent
with a model in which the expected value of interacting with an unknown person is low (making traveling solely to meet new
people unlikely), while the benefits from interacting with the same person repeatedly are high. Geographic proximity and race
are greater determinants of social interaction than are common interests, majors, or family background. Two randomly chosen
White students interact three times more often than do a Black student and a White student. However, placing the Black and
White student in the same freshman dorm increases their frequency of interaction by a factor of three. A traditional “linear
in group means” model of peer ability is only a reasonable approximation to the ability of actual peers chosen when we form
the groups around all key factors including distance, race and cohort.
The high variance of crime rates across time and space is one of the oldest puzzles in the social sciences; this variance
appears too high to be explained by changes in the exogenous costs and benefits of crime. We present a model where social
interactions create enough covariance across individuals to explain the high cross-city variance of crime rates. This model
provides an index of social interactions which suggests that the amount of social interactions is highest in petty crimes,
moderate in more serious crimes, and almost negligible in murder and rape.
The authors examine conditions under which 'Veblen effects' arise from the desire to achieve social status by signaling wealth through conspicuous consumption. While Veblen effects cannot ordinarily arise when preferences satisfy a 'single-crossing property,' they may emerge when this property fails. In that case, 'budget' brands are priced at marginal cost, while 'luxury' brands, though not intrinsically superior, are sold at higher prices to consumers seeking to advertise wealth. Luxury brands earn strictly positive profits under conditions that would, with standard formulations of preferences, yield marginal-cost pricing. The authors explore factors that induce Veblen effects and they investigate policy implications. Copyright 1996 by American Economic Association.
A model of fashion cycles is developed in which designs are used as a signaling device in a 'dating game.' A monopolist periodically creates a new design. Over time the price of the design falls as it spreads across the population. Once sufficiently many consumers own the design it is profitable to create a new design and thereby render the old design obsolete. This paper gives conditions under which all consumers would be better-off by banning the use of fashion. Competition among designers may lead to less frequent changes in fashion and to higher prices than monopoly. Copyright 1995 by American Economic Association.
This paper introduces a utility function that nests three classes of utility functions: (1) time-separable utility functions; (2) "catching up with the Joneses" utility functions that depend on the consumer's level of consumption relative to the lagged cross-sectional average level of consumption; and (3) utility functions that display habit formation. Closed-form solutions for equilibrium asset prices are derived under the assumption that consumption growth is i.i.d. The equity premia under catching up with the Joneses and under habit formation are, for some parameter values, as large as the historically observed equity premium in the United States.
We present a consumption-based model that explains a wide variety of dynamic asset pricing phenomena, including the procyclical variation of stock prices, the long-horizon predictability of excess stock returns, and the countercyclical variation of stock market volatility. The model captures much of the history of stock prices from consumption data. It explains the short- and long-run equity premium puzzles despite a low and constant risk-free rate. The results are essentially the same whether we model stocks as a claim to the consumption stream or as a claim to volatile dividends poorly correlated with consumption. The model is driven by an independently and identically distributed consumption growth process and adds a slow-moving external habit to the standard power utility function. These features generate slow countercyclical variation in risk premia. The model posits a fundamentally novel description of risk premia: Investors fear stocks primarily because they do poorly in recessions unrelated to the risks of long-run average consumption growth.
I. The nature of the problem, 183. — II. Functional and nonfunctional demand, 188. — III. The bandwagon effect, 190. — IV. The snob effect, 199. — V. The Veblen effect, 202. — VI. Mixed effects, 205. — VII. Conclusion, 206.
This essay incorporates a general treatment of social interactions into the modern theory of consumer demand. Section 1 introduces the topic and explores some of the existing perspectives on social interactions and their importance in the basic structure of wants. In Section 2, various characteristics of different persons are assumed to affect the utility functions of some persons, and the behavioral implications are systematically explored. Section 3 develops further implications and applications in the context of analyzing intra-family relations, charitable behavior, merit goods and multi-persons interactions, and envy and hatred. The variety and significance of these applications is persuasive testimony not only to the importance of social interactions, but also to the feasibility of incorporating them into a rigorous analysis.
We analyze a general equilibrium exchange economy with a continuum of agents who have "catching up with the Joneses" preferences and differ only with respect to the curvature of their utility functions. While individual risk aversion does not change over time, dynamic redistribution of wealth among the agents leads to countercyclical time variation in the Sharpe ratio of stock returns. We show that both the conditional risk premium and the return volatility are negatively related to the level of stock prices. Therefore, our model exhibits many of the empirically observed properties of aggregate stock returns, for example, patterns of autocorrelation in returns, the "leverage effect" in return volatility, and long-horizon return predictability.
Recent studies argue that the spread-adjusted Taylor rule (STR), which includes a response to the credit spread, replicates monetary policy in the United State. We show (1) STR is a theoretically optimal monetary policy under heterogeneous loan interest rate contracts in both discretionay and commitment monetary policies, (2) however, the optimal response to the credit spread is ambiguous given the financial market structure in theoretically derived STR, and (3) there, a commitment policy is effective in narrowing the credit spread when the central bank hits the zero lower bound constraint of the policy rate.
This paper analyzes a model in which individuals care about both consumption (intrinsic utility) and social status. Status depends on public perceptions about an individual's predispositions rather than on the individual's actions. However, since predispositions are unobservable, actions signal predispositions and therefore affect status. When status is sufficiently important relative to intrinsic utility, many individuals conform to a rigid standard of behavior, despite heterogeneous intrinsic preferences. When status is relatively unimportant, no conformity emerges. The model produces both customs and fads, and it suggests an explanation for the development of multiple subcultures with distinct norms. Copyright 1994 by University of Chicago Press.
Utilizing the Fechner-Thurstone direct utility function, we test Thorstein Veblen's theory of conspicuous consumption. If Thorstein Veblen's explanatory theory of utility and dynamic preference formation is adopted as a maintained hypothesis, the neo-classical theory off the utility-maximizing consumer turns out to be in excellent agreement with post-Second World War commodity expenditure data for the United States.
The Moving to Opportunity (MTO) demonstration assigned housing vouchers via random lottery to public housing residents in
five cities. We use the exogenous variation in residential locations generated by MTO to estimate neighborhood effects on
youth crime and delinquency. The offer to relocate to lower-poverty areas reduces arrests among female youth for violent and
property crimes, relative to a control group. For males the offer to relocate reduces arrests for violent crime, at least
in the short run, but increases problem behaviors and property crime arrests. The gender difference in treatment effects seems
to reflect differences in how male and female youths from disadvantaged backgrounds adapt and respond to similar new neighborhood
environments.
This paper uses a unique data set to measure peer effects among college roommates. Freshman year roommates and dormmates are randomly assigned at Dartmouth College. I find that peers have an impact on grade point average and on decisions to join social groups such as fraternities. Residential peer effects are markedly absent in other major life decisions such as choice of college major. Peer effects in GPA occur at the individual room level, whereas peer effects in fraternity membership occur both at the room level and the entire dorm level. Overall, the data provide strong evidence for the existence of peer effects in student outcomes. © 2001 the President and Fellows of Harvard College and the Massachusetts Institute of Technology
The author studies the implications for optimal portfolio decisions and equilibrium asset prices of the hypothesis that agents care about other agents' consumption level (in addition to their own). That hypothesis is introduced in two settings: (1) a one-period CAPM model and (2) a multiperiod asset pricing model. The presence of externalities is shown to affect the optimal risky share, as well as the size of adjustments in the latter in response to exogenous changes in the risk-adjusted equity premium. In equilibrium, the equity premium is also affected by the sign and the intensity of the externalities. Copyright 1994 by Ohio State University Press.
This paper examines the reflection problem that arises when a researcher observing the distribution of behaviour in a population
tries to infer whether the average behaviour in some group influences the behaviour of the individuals that comprise the group.
It is found that inference is not possible unless the researcher has prior information specifying the compisition of reference
groups. If this information is available, the prospects for inference depend critically on the population relationship between
the variables defining reference groups and those directly affecting outcomes. Inference is difficult to implossible if these
variables are functionally dependent or are statistically independent. The prospects are better if the variables defining
reference groups and those directly affecting outcomes are moderately related in the population.
A model of social distance is presented that is useful for understanding social decisions. An example is constructed of class stability. Agents who are initially close interact strongly while those who are socially distant have little interaction. In this example, inherited social position, which may be interpreted as social class, plays a dominant role. The relevance of this model to social decisions, such as the choice of educational attainment and childbearing, is discussed in the context of specific ethnographic examples. Class position may play a dominant role in these decisions.
This paper supposes an individual cares about his/her own wealth not only directly but also via the relative standing that this wealth induces. The implications for risk-taking are investigated in particular. Such a model provides a natural explanation of the "concave-convex-concave" utility described by M. Friedman and L. Savage (1948). However, there are a number of key differences between the present model and any model based on own wealth alone. For example, an equilibrium wealth distribution here may have a middle class. Further, the status interaction involves an externality and an equilibrium wealth distribution may be Pareto inefficient. Copyright 1992 by The Econometric Society.
I analyse a model that explicitly incorporates local interactions and allows agents to exchange information about job openings
within their social networks. Agents are more likely to be employed if their social contacts are also employed. The model
generates a stationary distribution of unemployment that exhibits positive spatial correlations. I estimate the model via
an indirect inference procedure, using Census Tract data for Chicago. I find a significantly positive amount of social interactions
across neighbouring tracts. The local spillovers are stronger for areas with less educated workers and higher fractions of
minorities. Furthermore, they are shaped by ethnic dividing lines and neighbourhood boundaries.
If individuals care about their status, defined as their rank in the distribution of consumption of one "positional" good, then the consumer's problem is strategic as her utility depends on the consumption choices of others. In the symmetric Nash equilibrium, each individual spends an inefficiently high amount on the status good. Using techniques from auction theory, we analyze the effects of exogenous changes in the distribution of income. In a richer society, almost all individuals spend more on conspicuous consumption, and individual utility is lower at each income level. In a more equal society, the poor are worse off.
The Theory of the Leisure Class. An Economic Study of Institutions 1899 (original publication date), Random House
- Thorstein Veblen
Veblen, Thorstein. " The Theory of the Leisure Class. An Economic Study of
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How Do Friendships Form? Dartmouth College working paper. Morgenstern, Oskar Demand Theory Reconsidered
- David Marmaros
- Bruce Sacerdote
Marmaros, David and Sacerdote, Bruce. " How Do Friendships Form? " 2004,
Dartmouth College working paper.
Morgenstern, Oskar. " Demand Theory Reconsidered. " Quarterly Journal of
Economics, February 1948, 62(2), pp. 165-201.
Consumer Behavior. Buying, Having, and Being The Development of Utility Theory. II
- Michael R Solomon
Solomon, Michael R. " Consumer Behavior. Buying, Having, and Being. " Prentice
Hall, New Jersey, 1999, fourth edition.
Stigler, George. " The Development of Utility Theory. II. " Journal of Political
Economy, October 1950, 58(5), pp. 373-396.