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

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  • Mark Grinblatt
  • Matti Keloharju
  • Seppo Ikaheimo

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.

Suggested Citation

  • Mark Grinblatt & Matti Keloharju & Seppo Ikaheimo, 2004. "Interpersonal Effects in Consumption: Evidence from the Automobile Purchases of Neighbors," NBER Working Papers 10226, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:10226
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    Cited by:

    1. Patrick Bayer & Stephen L. Ross & Giorgio Topa, 2008. "Place of Work and Place of Residence: Informal Hiring Networks and Labor Market Outcomes," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1150-1196, December.
    2. Patrick Bayer & Stephen L. Ross, 2006. "Identifying Individual and Group Effects in the Presence of Sorting: A Neighborhood Effects Application," Working papers 2006-13, University of Connecticut, Department of Economics, revised Jan 2009.
    3. 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.
    4. Enrichetta Ravina, 2005. "Keeping Up with the Joneses: Evidence from Micro Data," 2005 Meeting Papers 557, Society for Economic Dynamics.
    5. David Marmaros & Bruce Sacerdote, 2006. "How Do Friendships Form?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(1), pages 79-119.
    6. Costin CIORA, 2016. "Is there a conspicuous consumption effect in Bucharest housing market?," Romanian Journal of Economics, Institute of National Economy, vol. 42(1(51)), pages 164-174, june.
    7. Marco Guerzoni & Rene Soellner, 2013. "Uniqueness Seeking and Demand Estimation in the German Automobile Industry," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 3(2), pages 179-199, December.
    8. Clark, Andrew E. & Loheac, Youenn, 2007. ""It wasn't me, it was them!" Social influence in risky behavior by adolescents," Journal of Health Economics, Elsevier, vol. 26(4), pages 763-784, July.
    9. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 2005. "Information Cascades and Observational Learning," Working Paper Series 2005-22, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    10. Robert Bifulco & Jason Fletcher & Stephen Ross, 2008. "The Effect of Classmate Characteristics on Individual Outcomes: Evidence from the Add Health," Working papers 2008-21, University of Connecticut, Department of Economics, revised Jan 2009.
    11. Yannis Ioannides, 2006. "Empirics of Social Interactions," Discussion Papers Series, Department of Economics, Tufts University 0611, Department of Economics, Tufts University.
    12. 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 and International Relations Area.
    13. Enrico Moretti, 2011. "Social Learning and Peer Effects in Consumption: Evidence from Movie Sales," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(1), pages 356-393.

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    JEL classification:

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

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