Continuing to make slow progress on understanding how to add information and behavior diffusion to economics: Leonardo Bursztyn, Florian Ederer, Bruno Ferman, Noam Yuchtman: Understanding Mechanisms Underlying Peer Effects: Evidence from a Field Experiment on Financial Decisions: "When someone purchases an asset, his peers may also want to purchase it, both because they learn from his choice ('social learning') and because his possession of the asset directly affects others' utility of owning the same asset ('social utility'). We randomize whether one member of a peer pair who chose to purchase an asset has that choice implemented... Then we randomize whether the second member of the pair: (1) receives no information... or (2) is informed of the first member's desire to purchase the asset and the result of the randomization.... This allows us to estimate the effects of learning plus possession, and learning alone.... Both social learning and social utility channels have statistically and economically significant effects.... Investors report updating their beliefs about asset quality after learning about their peer's revealed preference... report motivations consistent with 'keeping up with the Joneses' when learning about their peer's possession of the asset. These results can help shed light on the mechanisms underlying herding behavior...
#noted #finance #behavior
