Peer Effects in Consumption: The Role of Information

Chicago Booth Research Paper No. 19-09

70 Pages Posted: 22 Feb 2019 Last revised: 12 May 2022

See all articles by Francesco D'Acunto

Francesco D'Acunto

Georgetown University

Alberto G. Rossi

Georgetown University

Michael Weber

University of Chicago - Finance; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2, 2022

Abstract

We isolate and quantify the information channel of peer effects using a unique consumption setting that by construction excludes any scope for common shocks or social pressure—a transaction-level panel dataset of spending paired with crowdsourced information about the spending of anonymous “peers" elicited at a different time than when users make their consumption choices. All consumers converge to their peers' spending and more so when facing more informative peer signals, with the effect building up over time. The spending adjustments, though, are substantially larger for the overspenders, who close 37% of their spending gap within 12 months of using the platform. The effect for underspenders is 9% over 12 months. For identification, we exploit consumers' quasi-random assignment to peer groups in an instrumental-variable strategy. Similar evidence from on a non-selected population provides external validity.

Keywords: Social Learning, Beliefs and Expectations, FinTech, Robo-advising, Social Finance, Information Economics, Household Finance

JEL Classification: D12, D14, D91, E22, G41

Suggested Citation

D'Acunto, Francesco and Rossi, Alberto G. and Weber, Michael, Peer Effects in Consumption: The Role of Information (February 2, 2022). Chicago Booth Research Paper No. 19-09, Available at SSRN: https://ssrn.com/abstract=3339335 or http://dx.doi.org/10.2139/ssrn.3339335

Francesco D'Acunto

Georgetown University ( email )

Washington, DC 20057
United States

Alberto G. Rossi

Georgetown University ( email )

McDonough School of Business
Georgetown University
Washington, DC 20057
United States

Michael Weber (Contact Author)

University of Chicago - Finance ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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