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 dataset 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.

Keywords: Social influennce, consumption, network effects, automobiles

JEL Classification: A10, D10, D12