Heterogenous Peer Effects: How Community Connectivity Affects Car Purchases

Joshua Shemesh, Fernando Zapatero and Yves Zenou

No 17306, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We show that the intensity of "keeping up with the Joneses" behavior is largely determined by the extent to which a community is socially connected. Using a unique dataset on car purchases in Southern California, we find that social influence intensifies in suburban communities in which neighbors are likely to know each other well. The effect of connected communities is particularly apparent in higher price segments and cannot be fully explained by word-of-mouth as it spills across car makes. Our findings suggest that positional externalities from the consumption of visible status goods are higher in closer-knitted social networks.

Keywords: Conspicuous consumption; Neighbor effects; Population density; Tight-knit community (search for similar items in EconPapers)
JEL-codes: A14 D12 (search for similar items in EconPapers)
Date: 2022-05
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