When Harry Bet with Sally: An Empirical Analysis of Multiple Peer Effects in Casino Gambling Behavior

Marketing Science, Forthcoming

38 Pages Posted: 28 Nov 2012 Last revised: 29 Sep 2014

See all articles by Hee Mok Park

Hee Mok Park

University of Connecticut - School of Business

Puneet Manchanda

University of Michigan, Stephen M. Ross School of Business

Date Written: September 18, 2014

Abstract

In many consumption settings (e.g., restaurants), individuals consume products either alone or with their peers (e.g., friends). In this study, we propose a general framework for modeling peer effects by including two new peer effects, the exogenous peer effect (exogenous factors that could change the peer's behavior) and the peer presence effect (when the peer is present but not consuming) - in addition to the well-known endogenous peer effect. We develop an empirical model that allows us to identify all three effects simultaneously and apply it to behavioral data from a casino setting. The model takes the form of a simultaneous equation model with the structural parameters expressed as a function of the ratio of the reduced form parameters. This necessitates the use of the Minimum Expected Loss approach, allowing us to obtain consistent estimates at the individual level. Our data comprise detailed gambling activity for a panel of individuals at a single casino over a two-year period. Our results show that all three types of peer effects exist. These effects vary across individuals and exhibit considerable asymmetry within pairs of peers. We discuss how our results can help managers allocate resources more effectively and policy makers formulate regulatory guidelines with more complete information.

Keywords: Peer Effects, Structural Models, Simultaneous Equation Models, Hierarchical Bayes Methods, MELO Estimator, Casino Gaming and Gambling

Suggested Citation

Park, Hee Mok and Manchanda, Puneet, When Harry Bet with Sally: An Empirical Analysis of Multiple Peer Effects in Casino Gambling Behavior (September 18, 2014). Marketing Science, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2182019 or http://dx.doi.org/10.2139/ssrn.2182019

Hee Mok Park (Contact Author)

University of Connecticut - School of Business ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States

Puneet Manchanda

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-936-2445 (Phone)
734-936-8716 (Fax)

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