The Intensity of Keeping Up with the Joneses Behavior: Evidence from Neighbor Effects in Car Purchases

38 Pages Posted: 10 Apr 2011 Last revised: 2 Sep 2016

See all articles by Joshua Shemesh

Joshua Shemesh

Monash University - Department of Banking and Finance; Financial Research Network (FIRN)

Fernando Zapatero

Questrom School of Business, Boston University

Date Written: May 5, 2016

Abstract

We show that status-driven behavior is largely determined by how connected a community is. Using a unique dataset on car purchases in Southern California, we show that social influence intensifies in suburban communities in which neighbors are likely to know each other well. The effect of connected communities cannot be fully explained by word of mouth, as it spills over across different brands, and is particularly apparent in higher price segments. We argue that, in connected communities, the signaling of income or wealth through the public display of consumption has a substantial effect on the behavior of neighbors.

Keywords: Relative Wealth Concerns, Conspicuous Consumption

JEL Classification: D12

Suggested Citation

Shemesh, Joshua and Zapatero, Fernando, The Intensity of Keeping Up with the Joneses Behavior: Evidence from Neighbor Effects in Car Purchases (May 5, 2016). Available at SSRN: https://ssrn.com/abstract=1805206 or http://dx.doi.org/10.2139/ssrn.1805206

Joshua Shemesh

Monash University - Department of Banking and Finance ( email )

Melbourne
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Fernando Zapatero (Contact Author)

Questrom School of Business, Boston University ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States
617-353-3631 (Phone)

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