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Interpersonal Effects in Consumption: Evidence from the Automobile Purchases of Neighbors

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Author Info
Mark Grinblatt
Matti Keloharju
Seppo Ikaheimo

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Abstract

This study analyzes the automobile purchase behavior of all residents of two Finnish provinces over several years. It finds that a consumer's purchases are strongly influenced by the purchases of his neighbors, particularly purchases in the recent past and by neighbors who are geographically most proximate. There is little evidence that emotional biases, like envy or an urge to conform, lie behind the interpersonal influence in automobile consumption. The most reasonable alternative explanation for these findings is some form of information sharing among neighbors.

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Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10226.

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Date of creation: Jan 2004
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Handle: RePEc:nbr:nberwo:10226

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D1 - Microeconomics - - Household Behavior
D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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  1. Studies on the automobile industry
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Pesendorfer, Wolfgang, 1995. "Design Innovation and Fashion Cycles," American Economic Review, American Economic Association, vol. 85(4), pages 771-92, September. [Downloadable!] (restricted)
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  2. Gali, Jordi, 1994. "Keeping Up with the Joneses: Consumption Externalities, Portfolio Choice, and Asset Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(1), pages 1-8, February. [Downloadable!] (restricted)
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  3. Abel, A.B., 1990. "Asset Prices Under Habit Formation And Catching Up With The Joneses," Weiss Center Working Papers 1-90, Wharton School - Weiss Center for International Financial Research.
    Other versions:
  4. Basmann, Robert L & Molina, David J & Slottje, Daniel J, 1988. "A Note on Measuring Veblen's Theory of Conspicuous Consumption," The Review of Economics and Statistics, MIT Press, vol. 70(3), pages 531-35, August. [Downloadable!] (restricted)
  5. Yeung Lewis Chan & Leonid Kogan, 2002. "Catching Up with the Joneses: Heterogeneous Preferences and the Dynamics of Asset Prices," Journal of Political Economy, University of Chicago Press, vol. 110(6), pages 1255-1285, December. [Downloadable!] (restricted)
  6. George J. Stigler, 1950. "The Development of Utility Theory. I," Journal of Political Economy, University of Chicago Press, vol. 58, pages 307. [Downloadable!] (restricted)
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  7. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 841-77, October. [Downloadable!] (restricted)
  8. John Y. Campbell & John H. Cochrane, 1994. "By Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior," CRSP working papers 412, Center for Research in Security Prices, Graduate School of Business, University of Chicago. [Downloadable!]
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  9. George A. Akerlof, 1997. "Social Distance and Social Decisions," Econometrica, Econometric Society, vol. 65(5), pages 1005-1028, September.
  10. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October. [Downloadable!] (restricted)
  11. Bagwell, Laurie Simon & Bernheim, B Douglas, 1996. "Veblen Effects in a Theory of Conspicuous Consumption," American Economic Review, American Economic Association, vol. 86(3), pages 349-73, June. [Downloadable!] (restricted)
  12. Fishman, Arthur, 1992. "Search Technology, Staggered Price-Setting, and Price Dispersion," American Economic Review, American Economic Association, vol. 82(1), pages 287-98, March. [Downloadable!] (restricted)
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  13. John Y. Campbell & John Cochrane, 1999. "Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 205-251, April. [Downloadable!] (restricted)
  14. Robson, Arthur J, 1992. "Status, the Distribution of Wealth, Private and Social Attitudes to Risk," Econometrica, Econometric Society, vol. 60(4), pages 837-57, July. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bruce Sacerdote & David Marmaros, 2005. "How Do Friendships Form?," NBER Working Papers 11530, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Yannis Ioannides, 2006. "Empirics of Social Interactions," Discussion Papers Series, Department of Economics, Tufts University 0611, Department of Economics, Tufts University. [Downloadable!]
  3. Andrew E. Clark & Youenn Lohéac, 2005. ""It Wasn’t Me, It Was Them!" Social Influence in Risky Behavior by Adolescents," IZA Discussion Papers 1573, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  4. Federico Cingano & Alfonso Rosolia, 2006. "People I Know: Workplace Networks and Job Search Outcomes," Temi di discussione (Economic working papers) 600, Bank of Italy, Economic Research Department. [Downloadable!]
  5. Piero Cipollone & Alfonso Rosolia, 2007. "Social Interactions in High School: Lessons from an Earthquake," American Economic Review, American Economic Association, vol. 97(3), pages 948-965, June. [Downloadable!]
    Other versions:
  6. Peter Kuhn & Peter Kooreman & Adriaan Soetevent & Arie Kapteyn, 2008. "The Own and Social Effects of an Unexpected Income Shock: Evidence from the Dutch Postcode Lottery," University of California at Santa Barbara, Economics Working Paper Series 06-08, Department of Economics, UC Santa Barbara. [Downloadable!]
    Other versions:
  7. Enrico Moretti, 2008. "Social Learning and Peer Effects in Consumption: Evidence from Movie Sales," NBER Working Papers 13832, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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