Social Influence and Networks
Sunday, Jan. 7, 2018 8:00 AM - 10:00 AM
- Chair: Marina Niessner, Yale University
Keeping Up with the Ponzis
AbstractI study how peers influence financial decision-making in a large socially spreading Ponzi scheme. Investors could join the scheme only by personal invitation from an existing member, and I can observe inviter-invitee relationships among the participants. Controlling for personal characteristics and inviter fixed effects, investors invest more if their inviter has comparatively higher income, age, and education. The marginal effect of the inviter’s income is highest when it is just above the invitee’s income, consistent with relative wealth concerns influencing decision-making. I also find that social behavior and investment behavior are correlated: Inviters invest more compared to non-inviters.
Tear Down This Wall Street: Anti-market Rhetoric and Investment
AbstractAnti-market rhetoric pre-exists modern capitalism, is diffused in capitalistic economies, and peaks during economic crises. Is anti-market rhetoric an inert cultural by-product of crises, or does it affect economic decision-making? If it does, through which channels? To avoid the confounding economic shocks that accompany economic crises, I manipulate exposure to anti-market rhetoric in an artefactual field experiment. Subjects exposed to anti-market rhetoric invest less often and less money in risky opportunities than controls. Risk aversion does not change with exposure. Instead, treated subjects have a more negative view of the financial sector, even if they do not realize they are exposed to anti-market rhetoric. They react to positive news but not to negative news regarding investment outcomes in subsequent investment choices, as predicted by context-dependent beliefs. The effect is stronger for women, older, and college-educated subjects. Like motivated beliefs, anti-market rhetoric makes more sophisticated agents deviate from neoclassical decision-making.
- G0 - General