On Peer Effects: Behavioral Contagion of (Un)Ethical Behavior and the Role of Social Identity

Social interactions and the resulting peer effects loom large in both economic and social contexts. This is particularly true for the spillover of (un)ethical behavior in explaining how behavior and norms spread across individual people, neighborhoods, or even cultures. Although we understand and observe the outcomes of such contagion effects, little is known about the drivers and the underlying mechanisms, especially with respect to the role of social identity with one’s peers and the (un)ethicality of behavior one is exposed to. We use a variant of a give-or-take dictator game to shed light on these aspects in a con-trolled laboratory setting. Our experiment contributes to the existing literature in two ways: first, using a novel approach of inducing social identification with one’s peers in the lab, our design allows us to analyze the spillover-effects of (un)ethical behavior under varied levels of social identification. Second, we study whether contagion of ethical behavior differs from contagion of unethical behavior. Our results suggest that a) unethical behavior is more contagious, and b) social identification with one’s peers and not the (un)ethicality of observed behavior is the main driver of behavioral contagion. Our findings are particularly important from a policy perspective both in order to foster pro-social and mitigate deviant behavior.