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Individual choice under social influence

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“The first thing you must realize is that power is collective. The individual only has power in so far as he ceases to be an individual”

O’Brien in 1984, by George Orwell.

Abstract

Individual decision makers (DMs) are often influenced by their social environment when making choices. In this paper, we propose a simple choice-theoretic model to take into account the impact of social groups on individual decision making. First, we define a notion of socially acceptable alternatives by a particular social group from an arbitrary menu, which is analogous to indifference sets in consumer theory. We then proceed to study two potential scenarios in which a DM’s choices are distorted by social influence. While social groups serve as tie-breakers in the first case, in the second case they become more influential in shaping DM’s preferences in conformity to its own social preferences. Thus, the two scenarios we discuss could be seen as two extreme cases of social influence on individual choices. In each case, characterization theorems are provided to identify choice correspondences that satisfy our models. Some of our axioms are extensions of classic axioms. Thus, the characterization theorems also show what choice behaviors these axioms describe when adapted to the context of social influence on individual decision making.

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Acknowledgements

We would like to thank the patient and enlightening counsel and guidance of our advisor Efe Ok. We also thank Christopher Chambers, Mert Kimya, Christopher Kops, RC Xi Zhi Lim, Paola Manzini, Marco Mariotti, Yusufcan Masatlioglu, Hiroki Nishimura, Pietro Ortoleva, Michael Richter, and Ariel Rubinstein for their helpful comments and discussion. We thank the anonymous referees for their helpful comments. Lastly, we thank seminar participants at New York University, Washington University at St. Louis, Econometrics Society Asia meeting, Australasia meeting, China meeting, North America meeting and EEA-ESEM virtual meeting for their helpful comments.

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Correspondence to Boyao Li.

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Demirkan, Y., Li, B. Individual choice under social influence. Econ Theory 76, 585–606 (2023). https://doi.org/10.1007/s00199-022-01466-w

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  • DOI: https://doi.org/10.1007/s00199-022-01466-w

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