Self-Control in Peer Groups
AbstractPeople with a self-control problem often seek relief through social interactions rather than binding commitments. Thus, in self-help groups like Alcoholics Anonymous, Narcotics Anonymous etc, members are said to achieve better personal outcomes by mainly sharing their experiences. In other settings, however, peer influences can severely aggravate individual tendencies towards immediate gratification, as is often the case with interactions among schoolmates or neighborhood youths. Bringing together the issues of self-control and peer effects, we study how observing the behaviour of others affects individualsâ ability to resist their own impulses towards short-run gratification. We show how these purely informational spillovers can give rise to multiple equilibria, where agentsâ choices of self-restraint or self-indulgence are mutually reinforcing. More generally, we identify conditions on agentsâ initial self-confidence, confidence in others, and degree of correlation that uniquely lead to either a âgood newsâ equilibrium where social interactions improve self-discipline, a âbad news equilibriumâ where they damage it, or to both. We also conduct a welfare analysis to determine when group membership is preferable to, or worse than, isolation. Individuals will generally find groups useful for self-control only if they have at least a minimal level of confidence in their own and their peersâ ability to resist temptation. At the same time, having a partner who is âtoo perfectâ is no better than being alone, and therefore often less desirable than being matched to someone more like oneself. Our Paper thus provides a psychologically grounded theory of endogenous peer effects, as well as of the importance of group morale.
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Bibliographic InfoPaper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 189.
Date of creation: 2003
Date of revision:
Publication status: Published in Journal of Economic Theory, vol.�123, n°2, août 2005, p.�105-134.
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- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
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