Heterogenous Peer Effects: How Community Connectivity Affects Car Purchases

40 Pages Posted: 10 Apr 2011 Last revised: 16 May 2022

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

Yves Zenou

Stockholm University; Monash University - Department of Economics; Research Institute of Industrial Economics (IUI); IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: April 18, 2022

Abstract

We show that the intensity of "keeping up with the Joneses" behavior is largely determined by the extent to which a community is socially connected. Using a unique dataset on car purchases in Southern California, we find that social influence intensifies in suburban communities in which neighbors are likely to know each other well. The effect of connected communities is particularly apparent in higher price segments and cannot be fully explained by word-of-mouth as it spills across car makes. Our findings suggest that positional externalities from the consumption of visible status goods are higher in closer-knitted social networks.

Keywords: conspicuous consumption, neighbor effects, population density, tight-knit community

JEL Classification: A14, D12

Suggested Citation

Shemesh, Joshua and Zapatero, Fernando and Zenou, Yves and Zenou, Yves, Heterogenous Peer Effects: How Community Connectivity Affects Car Purchases (April 18, 2022). 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

Questrom School of Business, Boston University ( email )

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

Yves Zenou (Contact Author)

Monash University - Department of Economics ( email )

Australia

Stockholm University ( email )

Universitetsvägen 10
Stockholm, Stockholm SE-106 91
Sweden

Research Institute of Industrial Economics (IUI) ( email )

P.O. Box 5501
S-114 85 Stockholm
Sweden

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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