Social influence in household equity investment: Evidence from randomized military drafts
Authors | Chi, Hung, Lin, Tseng |
Year | 2023 |
Type | Working Paper |
Abstract | We provide causal evidence of the peer effect on investment in a large-scale natural experiment. We show that retail investors respond to the investment decisions of their military peers who were randomly assigned in compulsory military drafts: retail investors participate more in the stock market, invest more in stocks that peers hold, and perform better. Our investigation indicates that retail investors learn valuable information from their peers to make profitable investment decisions. These effects are more pronounced among peers who are more sophisticated and among stocks entailing less behavioral bias. Stocks with more peer clientele outperform stocks with less clientele. |
URL | https://sites.google.com/view/timcchung/research |
Tags | Archival Empirical | Consumer Decisions | Experimental / Survey-Based Empirical | Financing- and Investment Decisions (Individual) |
Epidemiological expectations
Authors | Carroll, Wang |
Year | 2022 |
Type | Working Paper | Literature Review Paper |
Abstract | 'Epidemiological' models of belief formation put social interactions at their core; such models are widely used by scholars who are not economists to study the dynamics of beliefs in populations. We survey the literature in which economists attempting to model the consequences of beliefs about the future -'expectations'- have employed a full-fledged epidemiological approach to explore an economic question. We draw connections to related work on 'contagion,' narrative economics, news/rumor spreading, and the spread of internet memes. A main theme of the paper is that a number of independent developments have recently converged to make epidemiological expectations ('EE') modeling more feasible and appealing than in the past. |
Keywords | Economic expectations, epidemiological expectations, social interactions, social dynamics, information diffusion, economic narratives |
URL | https://www.nber.org/papers/w30605?utm_campaign=ntwh&utm_medium=email&utm_source=ntwg4 |
Tags | Asset Pricing, Trading Volume and Market Efficiency | Consumer Decisions | Financing- and Investment Decisions (Individual) | Investment Decisions (Institutional) | Manager / Firm Behavior | Media and Textual Analysis | Propagation of Noise / Undesirable Outcomes | Social Network Structure | Social Transmission Biases | Theory |
Social finance as cultural evolution, transmission bias, and market dynamics
Authors | Akcay, Hirshleifer |
Journal | Proceedings of the National Academy of Sciences |
Year | 2021 |
Type | Published Paper | Literature Review Paper |
Abstract | The thoughts and behaviors of financial market participants depend upon adopted cultural traits, including information signals, beliefs, strategies, and folk economic models. Financial traits compete to survive in the human population and are modified in the process of being transmitted from one agent to another. These cultural evolutionary processes shape market outcomes, which in turn feed back into the success of competing traits. This evolutionary system is studied in an emerging paradigm, social finance. In this paradigm, social transmission biases determine the evolution of financial traits in the investor population. It considers an enriched set of cultural traits, both selection on traits and mutation pressure, and market equilibrium at different frequencies. Other key ingredients of the paradigm include psychological bias, social network structure, information asymmetries, and institutional environment. |
Keywords | evolutionary finance, cultural evolution, social interaction, behavioral economics, social finance |
URL | https://www.pnas.org/doi/10.1073/pnas.2015568118 |
Tags | Asset Pricing, Trading Volume and Market Efficiency | Consumer Decisions | Evolutionary Finance | Financing- and Investment Decisions (Individual) | Propagation of Noise / Undesirable Outcomes | Social Network Structure | Social Transmission Biases | Theory |
Media persuasion and consumption: evidence from the Dave Ramsey Show
Authors | Chopra |
Year | 2021 |
Type | Working Paper |
Abstract | Can entertaining mass media programs influence individual consumption and savings decisions? I study this question by examining the impact of the Dave Ramsey Show, an iconic US radio talk show which encourages people to spend less and save more. To that end, I combine household-level expenditure records from a large scanner panel with fine-grained information about the geographic coverage of the radio show over time. Exploiting the quasi-natural experiment created by the staggered expansion of the radio show from 2004 to 2019, I find that exposure to the radio show decreases monthly household expenditures. This effect is driven by households with initially high expenditures relative to their income. In a mechanism experiment, I document that listening to the radio show has a persistent effect on people's attitudes towards consumption and debt. This suggests that attitudinal changes are a key mechanism driving behavioral change. My findings highlight the potential of entertaining mass media programs for interventions aimed at changing people's financial decisions. |
Keywords | Consumption, Debt, Entertainment, Edutainment, Household Finance, Mass Media, Persuasion, Radio, Savings |
URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3992358 |
Tags | Archival Empirical | Consumer Decisions | Experimental / Survey-Based Empirical | Financing- and Investment Decisions (Individual) |
The salience of entrepreneurship: evidence from online business
Authors | Huang, Lin, Liu, Manso |
Year | 2021 |
Type | Working Paper |
Abstract | We study the psychological bias underlying the decision to become an entrepreneur in the online business context. Using entrepreneurs affiliated with Taobao Marketplace, the worldâs largest online shopping platform, as our sample, we find that people who observe the emergence of successful stores in their neighborhood are more likely to become online entrepreneurs. Relying on the Taobao store rating system and detailed geographical information for identification, we find that in rural areas of China, an increase in the online rating (upgrade event) of a store leads to a significant increase in the number of new stores within a 0.5-km radius. This effect increases with the magnitude of the upgrade event, decreases with physical distance from the focal store and is robust to a wide range of rigorous model specifications. However, such decisions to enter the market may be suboptimal, as entrants whose entrepreneurs are motivated by these upgrade events underperform relative to their peers in terms of sales and have a higher probability of market exit. Overall, our results are most consistent with salience theories of choice and cannot be explained by regional development or rational learning. |
Keywords | entrepreneurship, peer effect, salience theory, availability heuristic |
URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3843524 |
Tags | Archival Empirical | Consumer Decisions | Manager / Firm Behavior |
Social networks and credit supply and demand
Authors | Allen, Peng, Shan |
Year | 2020 |
Type | Working Paper |
Abstract | Social networks are associated with the demand for and supply of consumer and small business loans originated on lending marketplaces. Loan demand increases substantially with past borrowing activities of geographically distant but socially connected areas, with an elasticity of 0.21. Borrower-area social proximity to deposits increases funding likelihood by 5.61% and improves ex-post loan performance. We establish causality with granular instrumental variables obtained from natural disasters (demand-side) and financial adviser misconduct (supply-side). The results suggest social networks improve capital allocation by increasing the awareness of alternative lending platforms and facilitating the transmission of less accessible information complementary to loan-specific data. |
Keywords | social network, online lending marketplaces, credit demand and supply, information transmission |
URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3537714 |
Tags | Archival Empirical | Consumer Decisions | Financing- and Investment Decisions (Individual) | Social Network Structure |
Crowdsourcing financial information to change spending behavior
Authors | D'Acunto, Rossi, Weber |
Year | 2019 |
Type | Working Paper |
Abstract | We document five effects of providing individuals with crowdsourced spending information about their peers (individuals with similar characteristics) through a FinTech app. First, users who spend more than their peers reduce their spending significantly, whereas users who spend less keep constant or increase their spending. Second, users' distance from their peers' spending affects the reaction monotonically in both directions. Third, users' reaction is asymmetric - spending cuts are three times as large as increases. Fourth, lower-income users react more than others. Fifth, discretionary spending drives the reaction in both directions and especially cash withdrawals, which are commonly used for incidental expenses and anonymous transactions. We argue Bayesian updating, peer pressure, or the fact that bad news looms more than (equally-sized) good news cannot alone explain all these facts. |
Keywords | FinTech, learning, beliefs and expectations, peer pressure, financial decision-making, saving, consumer finance |
URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3348722 |
Tags | Archival Empirical | Consumer Decisions | Financing- and Investment Decisions (Individual) | Social Network Structure |
Status goods: experimental evidence from platinum credit cards
Authors | Bursztyn, Ferman, Fiorin, Kanz, Rao |
Journal | Quarterly Journal of Economics |
Year | 2018 |
Type | Published Paper |
Abstract | This article provides field-experimental evidence on status goods. We work with an Indonesian bank that markets platinum credit cards to high-income customers. In a first experiment, we show that demand for the platinum card exceeds demand for a nondescript control product with identical benefits, suggesting demand for the pure status aspect of the card. Transaction data reveal that platinum cards are more likely to be used in social contexts, implying social image motivations. In a second experiment, we provide evidence of positional externalities from the consumption of these status goods. A final experiment provides suggestive evidence that increasing self-esteem causally reduces demand for status goods,indicating that social image might be a substitute for self-image. |
Keywords | social status, consumer behavior, self-esteem, positional externalities |
URL | https://doi.org/10.1093/qje/qjx048 |
Tags | Consumer Decisions | Experimental / Survey-Based Empirical |
The effect of social density on word of mouth
Authors | Consiglio, Angelis, Costabile |
Journal | Journal of Consumer Research |
Year | 2018 |
Type | Published Paper |
Abstract | This research investigates whether a contextual factor-social density, defined as the number of people in a given area-influences consumers' propensity to share information. We propose that high- (vs. low-) density settings make consumers experience a loss of perceived control, which in turn makes them more likely to engage in word of mouth to restore it. Six studies, conducted online as well as in laboratory and naturalistic settings, provide support for this hypothesis. We demonstrate that social density increases the likelihood of sharing information with others and that a person's chronic need for control moderates this effect. Consistent with the proposed process, the effect of social density on information sharing is attenuated when participants have the opportunity to restore control before they engage in word of mouth. We also provide evidence that sharing information restores perceived control in high-density environments, and we disentangle the effect of social density from that of physical proximity. |
Keywords | social density, compensatory control, word of mouth |
URL | https://doi.org/10.1093/jcr/ucy009 |
Tags | Consumer Decisions | Experimental / Survey-Based Empirical |
What happens in vegas stays on TripAdvisor? A theory and technique to understand narrativity in consumer reviews
Authors | Laer, Escalas, Ludwig, Hende |
Journal | Journal of Consumer Research |
Year | 2018 |
Type | Published Paper |
Abstract | Many consumers base their purchase decisions on online consumer reviews. An overlooked feature of these texts is their narrativity: the extent to which they tell a story. The authors construct a new theory of narrativity to link the narrative content and discourse of consumer reviews to consumer behavior. They also develop from scratch a computerized technique that reliably determines the degree of narrativity of 190,461 verbatim, online consumer reviews and validate the automated text analysis with two controlled experiments. More transporting (i.e., engaging) and persuasive reviews have better-developed characters and events as well as more emotionally changing genres and dramatic event orders. This interdisciplinary, multimethod research should help future researchers (1) predict how narrativity affects consumers' narrative transportation and persuasion, (2) measure the narrativity of large digital corpora of textual data, and (3) understand how this important linguistic feature varies along a continuum. |
Keywords | automated text analysis, computational linguistics, consumer reviews, narrative persuasion, narrative transportation, storytelling |
URL | https://doi.org/10.1093/jcr/ucy067 |
Tags | Archival Empirical | Consumer Decisions | Media and Textual Analysis | Theory |
Partisan bias, economic expectations, and household spending
Authors | Mian, Sufi, Khoshkhou |
Year | 2018 |
Type | Working Paper |
Abstract | The well-documented rise in political polarization among the U.S. electorate over the past 20 years has been accompanied by a substantial increase in the effect of partisan bias on survey-based measures of economic expectations. Individuals have a more optimistic view on future economic conditions when they are more closely affiliated with the party that controls the White House, and this tendency has increased significantly over time. Individuals report a large shift in economic expectations based on partisan affiliation after the 2008 and 2016 elections, but administrative data on spending shows no effect of these shifts on actual household spending. |
Keywords | consumer confidence, government, economic, policy, sentiment, news, noise, spending, consumption, elections, voting, polarization, Trump, elections |
URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2620828 |
Tags | Archival Empirical | Consumer Decisions | Experimental / Survey-Based Empirical |
Causal inference in word-of-mouth research: methods and results
Authors | Seiler, Yao, Zervas |
Book | Customer Analytics for Maximum Impact: Academic Insights and Business Use Cases |
Year | 2018 |
Type | Book | Literature Review Paper |
Abstract | One of the biggest changes in the marketing landscape in recent years has been a shift toward fostering word-of-mouth (WOM) to let consumers advocate on a brand's behalf. Many marketing executives consider online WOM, which has increased dramatically in volume in recent years, one of the most effective forms of marketing. Every second, 6,000 tweets are posted on Twitter, and that volume is growing at around 30% per year. Similar patterns apply to other social media platforms such as Facebook, as well as to platforms that host costumer reviews. TripAdvisor and Yelp host 570 million and 142 million reviews, respectively, and are visited by 455 million and 188 million users each month. However, reliably measuring the impact of WOM on demand is subject to some unique challenges, and many marketing managers admit that measuring WOM effectiveness remains difficult. In this chapter, we outline the current state of the academic literature regarding the impact of online WOM on demand. We first outline measurement challenges in the realm of WOM and how they can be resolved. We then summarize recent findings on the effectiveness of WOM in two domains: customer reviews and online conversations about brands on platforms such as Twitter or other social media. The former are a type of activity that typically occur after consumption and that impose a specific structure (often a rating scale) on consumers' WOM. The latter instead are less structured and can take place before and/or after consumption. These two areas are sufficiently different and shall be treated separately. |
URL | http://people.bu.edu/zg/publications/wom-causal-inference.pdf |
Tags | Archival Empirical | Consumer Decisions | Media and Textual Analysis |
Tweeting as a marketing tool: a field experiment in the TV industry
Authors | Gong, Zhang, Zhao, Jiang |
Journal | Journal of Marketing Research |
Year | 2017 |
Type | Published Paper |
Abstract | Many businesses today have adopted tweeting as a new form of product marketing. However, whether and how tweeting affects product demand remains inconclusive. The authors explore this question using a randomized field experiment on Sina Weibo, the top tweeting website in China. The authors collaborate with a major global media company and examine how the viewing of its TV shows is affected by (1) the media company's tweets about its shows, and (2) recruited Weibo influentials' retweets of the company tweets. The authors find that both company tweets and influential retweets increase show viewing, but in different ways. Company tweets directly boost viewing, whereas influential retweets increase viewing if the show tweet is informative. Meanwhile, influential retweets are more effective than company tweets in bringing new Weibo followers to the company, which indirectly increases viewing. The authors discuss recommendations on how to manage tweeting as a marketing tool. |
Keywords | tweet, social media marketing, social media return on investment, field experiment, television |
URL | https://doi.org/10.1509/jmr.14.0348 |
Tags | Archival Empirical | Consumer Decisions | Manager / Firm Behavior | Media and Textual Analysis |
How language shapes word of mouth's impact
Authors | Packard, Berger |
Journal | Journal of Marketing Research |
Year | 2017 |
Type | Published Paper |
Abstract | Word of mouth affects consumer behavior, but how does the language used in word of mouth shape that impact? Might certain types of consumers be more likely to use certain types of language, affecting whose words have more influence? Five studies, including textual analysis of more than 1,000 online reviews, demonstrate that compared to more implicit endorsements (e.g., "I liked it," "I enjoyed it"), explicit endorsements (e.g., "I recommend it") are more persuasive and increase purchase intent. This occurs because explicit endorsers are perceived to like the product more and have more expertise. Looking at the endorsement language consumers actually use, however, shows that while consumer knowledge does affect endorsement style, its effect actually works in the opposite direction. Because novices are less aware that others have heterogeneous product preferences, they are more likely to use explicit endorsements. Consequently, the endorsement styles novices and experts tend to use may lead to greater persuasion by novices. These findings highlight the important role that language, and endorsement styles in particular, plays in shaping the effects of word of mouth. |
Keywords | word of mouth, language, persuasion, consumer knowledge, social perception |
URL | https://doi.org/10.1509/jmr.15.0248 |
Tags | Archival Empirical | Consumer Decisions | Media and Textual Analysis | Social Transmission Biases |
Does online word-of-mouth increase demand? (and how?) Evidence from a natural experiment
Authors | Seiler, Yao, Wang |
Journal | Marketing Science |
Year | 2017 |
Type | Published Paper |
Abstract | We leverage a temporary block of the Chinese microblogging platform Sina Weibo due to political events to estimate the causal effect of online word-of-mouth content on product demand in the context of TV show viewership. Based on this source of exogenous variation, we estimate an elasticity of TV show ratings (market share in terms of viewership) with respect to the number of relevant comments (comments were disabled during the block) of 0.016. We find that more postshow microblogging activity increases demand, whereas comments posted prior to the show airing do not affect viewership. These patterns are inconsistent with informative or persuasive effects and suggest complementarity between TV consumption and anticipated postshow microblogging activity. |
Keywords | microblogging, advertising, social media, word of mouth |
URL | https://pubsonline.informs.org/doi/abs/10.1287/mksc.2017.1045?casa_token=lxxq5FpqeeYAAAAA:wXJbLLGEETzSUvKZeU-YY5LI26G3TkYo9IMD1j6sOlCDOgwPNrrscJ-3k5Nj5Cm9pe5mi7ArVvpq |
Tags | Archival Empirical | Consumer Decisions | Media and Textual Analysis |
Sharing with friends versus strangers: how interpersonal closeness influences word-of-mouth valence
Authors | Dubois, Bonezzi, Angelis |
Journal | Journal of Marketing Research |
Year | 2016 |
Type | Published Paper |
Abstract | How does interpersonal closeness (IC)--the perceived psychological proximity between a sender and a recipient--influence word-of-mouth (WOM) valence? The current research proposes that high levels of IC tend to increase the negativity of WOM shared, whereas low levels of IC tend to increase the positivity of WOM shared. The authors hypothesize that this effect is due to low versus high levels of IC triggering distinct psychological motives. Low IC activates the motive to self-enhance, and communicating positive information is typically more instrumental to this motive than communicating negative information. In contrast, high IC activates the motive to protect others, and communicating negative information is typically more instrumental to this motive than communicating positive information. Four experiments provide evidence for the basic effect and the underlying role of consumers' motives to self-enhance and protect others through mediation and moderation. The authors discuss implications for understanding how WOM spreads across strongly versus weakly tied social networks. |
Keywords | word of mouth, word-of-mouth valence, interpersonal closeness, self-enhancement, social media |
URL | https://doi.org/10.1509/jmr.13.0312 |
Tags | Consumer Decisions | Experimental / Survey-Based Empirical | Media and Textual Analysis | Social Network Structure |
Suspense and surprise
Authors | Ely, Frankel, Kamenica |
Journal | Journal of Political Economy |
Year | 2015 |
Type | Published Paper |
Abstract | We model demand for noninstrumental information, drawing on the idea that people derive entertainment utility from suspense and surprise. A period has more suspense if the variance of the next period's beliefs is greater. A period has more surprise if the current belief is further from the last period's belief. Under these definitions, we analyze the optimal way to reveal information over time so as to maximize expected suspense or surprise experienced by a Bayesian audience. We apply our results to the design of mystery novels, political primaries, casinos, game shows, auctions, and sports. |
URL | https://www.journals.uchicago.edu/doi/full/10.1086/677350 |
Tags | Consumer Decisions | Financing- and Investment Decisions (Individual) | Investment Decisions (Institutional) | Manager / Firm Behavior | Social Transmission Biases | Theory |
News, politics, and negativity
Authors | Soroka, McAdams |
Journal | Political Communication |
Year | 2015 |
Type | Published Paper |
Abstract | Work in political communication has discussed the ongoing predominance of negative news, but has offered few convincing accounts for this focus. A growing body of literature shows that humans regularly pay more attention to negative information than to positive information, however. This article argues that we should view the nature of news content in part as a consequence of this asymmetry bias observed in human behavior. A psychophysiological experiment capturing viewers' reactions to actual news content shows that negative news elicits stronger and more sustained reactions than does positive news. Results are discussed as they pertain to political behavior and communication, and to politics and political institutions more generally. |
Keywords | negativity bias, mass media, political communication, psychophysiology |
URL | https://doi.org/10.1080/10584609.2014.881942 |
Tags | Consumer Decisions | Experimental / Survey-Based Empirical | Media and Textual Analysis | Social Transmission Biases |
Word of mouth and interpersonal communication: a review and directions for future research
Authors | Berger |
Journal | Journal of Consumer Psychology |
Year | 2014 |
Type | Published Paper | Literature Review Paper |
Abstract | People often share opinions and information with their social ties, and word of mouth has an important impact on consumer behavior. But what drives interpersonal communication and why do people talk about certain things rather than others? This article argues that word of mouth is goal driven and serves five key functions (i.e., impression management, emotion regulation, information acquisition, social bonding, and persuasion). Importantly, I suggest these motivations are predominantly self- (rather than other) serving and drive what people talk about even without their awareness. Further, these drivers make predictions about the types of news and information people are most likely to discuss. This article reviews the five proposed functions and well as how contextual factors (i.e., audience and communication channel) may moderate which functions play a larger role. Taken together, the paper provides insight into the psychological factors that shape word of mouth and outlines additional questions that deserve further study. |
URL | https://doi.org/10.1016/j.jcps.2014.05.002 |
Tags | Archival Empirical | Consumer Decisions | Experimental / Survey-Based Empirical | Media and Textual Analysis | Social Transmission Biases |
Temporal contiguity and negativity bias in the impact of online word of mouth
Authors | Chen, Lurie |
Journal | Journal of Marketing Research |
Year | 2013 |
Type | Published Paper |
Abstract | Prior research shows that positive online reviews are less valued than negative reviews. The authors argue that this is due to differences in causal attributions for positive versus negative information such that positive reviews tend to be relatively more attributed to the reviewer (vs. product experience) than negative reviews. The presence of temporal contiguity cues, which indicate that review writing closely follows consumption, reduces the relative extent to which positive reviews are attributed to the reviewer and mitigates the negativity bias. An examination of 65,531 Yelp.com restaurant reviews shows that review value is negatively related to review valence but that this negative relationship is absent for reviews that contain temporal contiguity cues. A series of lab studies replicates these findings and suggests that temporal contiguity cues enhance the value of a positive review and increase the likelihood of choosing a product with a positive review by changing reader beliefs about the cause of the review. |
Keywords | word of mouth, negativity bias, temporal contiguity, causal attributions |
URL | https://doi.org/10.1509/jmr.12.0063 |
Tags | Archival Empirical | Consumer Decisions | Experimental / Survey-Based Empirical | Social Transmission Biases |