Working Paper: CEPR ID: DP17306
Authors: Joshua Shemesh; Fernando Zapatero; Yves Zenou
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
JEL Codes: A14; D12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Neighbor purchases of the same car make (R21) | Individual car buying behavior (D19) |
| Neighbor purchases of a different car make (R21) | Individual car buying behavior (D19) |
| Social influence of neighbors (C92) | Individual car buying behavior (D19) |
| Social ties in lower-density areas (R23) | Social influence of neighbors (C92) |
| Luxury car purchases (G51) | Individual car buying behavior (D19) |