Peer Effects in Financial Decision-Making
76 Pages Posted: 29 Jun 2018 Last revised: 18 Dec 2019
Date Written: April 27, 2018
Peer effects might play an important role in complex financial decisions because many consumers lack experience with them and the costs of thinking through such decisions can be very high. We study peer effects in retirement savings, life insurance purchase, and two charitable giving programs in a military setting with plausibly exogenous assignment of individuals to social groups. Peers, defined broadly as social groups which may include members of different ranks, appear to play an important role in the charitable giving programs, but not in the other outcomes. We assess a number of potential reasons for the disparate findings and provide suggestive evidence that the observability of individuals' choices is key.
Keywords: Social Effects, Financial Decision-Making, Retirement Savings, Charitable Giving
JEL Classification: D14, D64, C31, G02
Suggested Citation: Suggested Citation