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Mandating behavioral conformity in social groups with conformist members

  • Grajzl, Peter
  • Baniak, Andrzej

Social interaction among individuals with a preference for conformity gives rise to coordination externalities which are not internalized in a non-cooperative setting. Mandating behavioral conformity, by centrally imposing a common, group-wide action, internalizes these coordination externalities, but also comes at a cost of restraining individuals’ self-regarding goals. We explore a framework of social interaction among privately informed individuals with conformist preferences to examine when mandating behavioral conformity improves group welfare. Our analysis elucidates how the desirability of mandating behavioral conformity is shaped by the group's socio-economic structure. We find that mandating behavioral conformity is not desirable in social groups that are ex ante homogeneous—either with respect to members’ contribution to group welfare or their innate conformist tendency. In contrast, mandating behavioral conformity can be beneficial in those ex ante heterogeneous social groups where the individuals who contribute most to group welfare also exhibit the strongest preference for conformity.

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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 82 (2012)
Issue (Month): 2 ()
Pages: 479-493

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Handle: RePEc:eee:jeborg:v:82:y:2012:i:2:p:479-493
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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