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A theory of esteem based peer pressure

Fabrizio Adriani and Silvia Sonderegger ()
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Silvia Sonderegger: School of Economics, University of Nottingham

No 2018-12, Discussion Papers from The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham

Abstract: Signaling models of esteem have implications for peer pressure. Using Benabou's and Tirole's 'honor-stigma' model, we analyze how the pressure to engage in costly signaling changes with the distribution of peers' attributes. In particular, we provide novel comparative statics on the effects of changes in mean, dispersion, skewness and other features of the distribution of peer quality. First, we provide conditions under which moving an individual to a group with higher mean quality may provide stronger incentives (i.e. a 'keeping up with the Joneses' effect) or may induce discouragement (a 'small fish in a big pond' effect). Second, we show that both right and left truncations of the distribution of peer quality reduce incentives. Third, more dispersed peer distributions provide stronger incentives. Finally, more right skewed peer distributions induce stronger incentives when only a small fraction of the group provide the signal, but reduce motivation when provision is widespread. We also analyze the aggregate effects of each of these distributional changes. Applications include education, redistribution, and conspicuous consumption.

Keywords: Esteem; Status; Peer pressure; Signaling; Small fish in a big pond; Conspicuous consumption; Distributional comparative statics. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cdm, nep-mic and nep-ure
Date: 2018-12
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