Consumer choices can be influenced by social factors leading to the adoption of products not necessarily for their utility but for social signaling reasons. The demand for certain products can be driven by the need to signal status or success rather than the practical value of the item. This phenomenon can create a trap where individuals feel compelled to purchase new versions or participate in expensive trends even if they would prefer these products didn't exist. The example of fancy weddings in India illustrates how social influence can drive spending on extravagant events, turning them into a competitive social norm. The research highlights the concept of collective traps in product markets, where individuals may feel pressured to conform to societal expectations or trends, even if they don't personally value or desire the product. The study delves into the intricate relationship between consumer choices, social influences, and the creation of demand for products that may not align with individual preferences.
Economists have discovered an odd phenomenon: many people who use social media (even you, maybe?) wish it didn’t exist. But that doesn’t mean they can escape.
- RESOURCES:
- "When Product Markets Become Collective Traps: The Case of Social Media," by Leonardo Bursztyn, Benjamin Handel, Rafael Jimenez, and Christopher Roth (NBER Working Paper, 2023).
- "Social Media and Xenophobia: Evidence from Russia," by Leonardo Bursztyn, Georgy Egorov, Ruben Enikolopov, and Maria Petrova (NBER Working Paper, 2019).
- "Status Goods: Experimental Evidence from Platinum Credit Cards," by Leonardo Bursztyn, Bruno Ferman, Stefano Fiorin, Martin Kanz, and Gautam Rao (NBER Working Paper, 2017).
- "'Acting Wife': Marriage Market Incentives and Labor Market Investments," by Leonardo Bursztyn, Thomas Fujiwara, and Amanda Pallais (American Economic Review, 2017).
- "Measuring Crack Cocaine and Its Impact," by Roland G. Fryer Jr., Paul S. Heaton, Steven D. Levitt, and Kevin M. Murphy (Economic Inquiry, 2013).