Peer Effects Explained: An Experimental Study of Social Pressure and Social Learning in Consumption Decisions
In various consumption decisions, from what clothes to wear to what investments to make, individuals are influenced by the choices of others. Such peer effects sometimes lead to herd behavior in the form of, e.g., fads and financial bubbles. To understand these processes, it is crucial to understand the underlying mechanisms. The novel experimental design of this paper allows for a separation of p