Mandating Behavioral Conformity in Social Groups with Conformist Members

29 Pages Posted: 7 Jan 2011

See all articles by Peter Grajzl

Peter Grajzl

Washington and Lee University - Department of Economics; CESifo

Andrzej Baniak

Central European University (CEU) - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: January 3, 2011

Abstract

Social interaction among individuals with a preference for conformity gives rise to coordination externalities which are not internalized in a non-cooperative setting. Mandating behavioral conformity, by centrally imposing a common, group-wide action, internalizes these coordination externalities, but also comes at a cost of restraining individuals' self-regarding goals. We explore a framework of social interaction among privately informed individuals with conformist preferences to examine when mandating behavioral conformity improves group welfare. Our analysis elucidates how the desirability of mandating behavioral conformity is shaped by the group's socio-economic structure. We find that mandating behavioral conformity is not desirable in social groups that are ex ante homogeneous - either with respect to members' contribution to group welfare or their innate conformist tendency. In contrast, mandating behavioral conformity can be beneficial in those ex ante heterogeneous social groups where the individuals who contribute most to group welfare also exhibit the strongest preference for conformity.

Keywords: Conformity, social interaction, coordination externalities, group heterogeneity

JEL Classification: Z13, D62, D82

Suggested Citation

Grajzl, Peter and Baniak, Andrzej, Mandating Behavioral Conformity in Social Groups with Conformist Members (January 3, 2011). Available at SSRN: https://ssrn.com/abstract=1734782 or http://dx.doi.org/10.2139/ssrn.1734782

Peter Grajzl (Contact Author)

Washington and Lee University - Department of Economics ( email )

Lexington, VA 24450
United States

HOME PAGE: http://home.wlu.edu/~grajzlp/

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Andrzej Baniak

Central European University (CEU) - Department of Economics ( email )

Nador u. 9.
Budapest H-1051
Hungary
(36) 1 327-3231 (Phone)
(36) 1 327-3232 (Fax)

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