Social Influence and Consumption: Evidence from the Automobile Purchases of Neighbors

Mark Grinblatt, Matti Keloharju and Seppo Ikäheimo
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Matti Keloharju: Helsinki School of Economics and CEPR
Seppo Ikäheimo: Helsinki School of Economics

The Review of Economics and Statistics, 2008, vol. 90, issue 4, pages 735-753

Abstract: This study analyzes the automobile purchase behavior of all residents of two Finnish provinces over several years. Using a comprehensive data set with location coordinates at the individual consumer level, it finds that the purchases of neighbors, particularly in the recent past and by those who are geographically most proximate, influence a consumer's purchases of automobiles. There is little evidence that emotional biases, like envy, account for the observed social influence on consumption. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Date: 2008
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