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Peer Pressure

Author

Listed:
  • Antoni Calvó-Armengol
  • Matthew O. Jackson

Abstract

We present a model where agents care about their neighbors' actions and can pressure them to take certain actions. Exerting pressure is costly for the exerting agent and it can impact the pressured agents by either lowering the cost of taking the action (which we call "positive pressure" ) or else by raising the cost of not taking the action (which we call "negative pressure" ). We show that when actions are strategic complements, agents with lower costs for taking an action pressure agents with higher costs, and that positive pressure can improve societal welfare. More generally, we detail who gains and who loses from peer pressure, and identify some circumstances under which pressure results in fully (Pareto) optimal outcomes as well as circumstances where it does not. We also point out differences between positive and negative pressure. (JEL: Z13, D62, C72, D85) (c) 2010 by the European Economic Association.

Suggested Citation

  • Antoni Calvó-Armengol & Matthew O. Jackson, 2010. "Peer Pressure," Journal of the European Economic Association, MIT Press, vol. 8(1), pages 62-89, March.
  • Handle: RePEc:tpr:jeurec:v:8:y:2010:i:1:p:62-89
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    Citations

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    Cited by:

    1. Jackson, Matthew O. & Zenou, Yves, 2015. "Games on Networks," Handbook of Game Theory with Economic Applications, Elsevier.
    2. Tomas Rodriguez Barraquer, 2013. "From sets of equilibria to structures of interaction underlying binary games of strategic complements," Discussion Paper Series dp655, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
    3. Dey, Oindrila & Das, Abhishek & Gupta, Gautam & Banerjee, Swapnendu, 2017. "Favouritism Or Fairness?: A Framed Laboratory Experiment," MPRA Paper 80214, University Library of Munich, Germany.
    4. Bruno Cardinale Lagomarsino & Matías Gutman & Lucía Freira & María Laura Lanzalot & Maximiliano Lauletta & Leandro Malchik & Felipe Montaño Campos & Bianca Pacini & Martín Rossi & Christian Valencia, 2015. "Peer Pressure and Externalities: Evidence from a field experiment," Working Papers 125, Universidad de San Andres, Departamento de Economia, revised Dec 2015.

    More about this item

    JEL classification:

    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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