Social Interaction, Observational Learning, and Privacy: the "Do Not Call" Registry

Many empirical studies have inferred contagion in behavior from a correlation between individual behavior and the behavior of others in the same social group, rather than from any direct evidence. The correlation has been variously attributed to social interaction, word of mouth communication, and observational learning. As Manski (1993) famously observed, such correlation might be explained by peer group influence, but also, similar responses to common environmental changes. More generally, correlation in behavior raises two questions – how information is transmitted and why individuals follow the choices of others. We address these questions in the context of subscriptions to the U.S. "do not call" registry in June-August 2003. Using a rich set of data culled from multiple sources, including longitudinal observations of household choice, we are able to separately identify -- Methods by which information is transmitted – social interaction and news media; -- Reasons why households follow the choices of others – observational learning and telemarketing diversion, and the impact of household heterogeneity on such learning and diversion. Among methods of information transmission, social interaction was relatively more important than news media. Among reasons for contagion, telemarketing diversion was relatively more important than observational learning, while the extent of learning decreased with social heterogeneity.