Social Norms in Networks
Philip Ushchev () and
Yves Zenou ()
No 13250, CEPR Discussion Papers from C.E.P.R. Discussion Papers
Although the linear-in-means model is the workhorse model in empirical work on peer effects, its theoretical properties are understudied. In this paper, we investigate how social norms affect individual effort, aggregate effort, and welfare. While individual productivity always positively affects own effort and utility, we show that taste for conformity has an ambiguous effect on individual outcomes and depends on whether an individual is above or below her own social norm. Equilibria are usually inefficient and, to restore the first best, the planner subsidizes (taxes) agents whose neighbors make efforts above (below) the social norms in equilibrium. Thus, provision of more subsidies to more central agents is not necessarily efficient.
Keywords: networks; Social norms; welfare (search for similar items in EconPapers)
JEL-codes: D85 J15 Z13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic, nep-net, nep-soc and nep-ure
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