Social norms in networks

Ushchev, Philip and Zenou, Yves (2020) Social norms in networks. Journal of Economic Theory, 185, 1-32, [104969]. (doi:10.1016/j.jet.2019.104969).

Record type: Article

Abstract

Although the linear-in-means model is the workhorse model in empirical work on peer effects, its theoretical properties are understudied. In this study, we develop a social-norm model that provides a microfoundation of the linear-in-means model and investigate its properties. We show that individual outcomes may increase, decrease, or vary non-monotonically with the taste for conformity. Equilibria are usually inefficient and, to restore the first best, the planner needs to subsidize (tax) agents whose neighbors make efforts above (below) the social norms. Thus, giving more subsidies to more central agents is not necessarily efficient. We also discuss the policy implications of our model in terms of education and crime.

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Local_Average_28-10-2019 - Accepted Manuscript

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Accepted/In Press date: 30 October 2019

e-pub ahead of print date: 7 November 2019

Published date: January 2020

Additional Information: Funding Information: We thank the editor, three anonymous referees, Arthur Campbell, Ben Golub, Matt O. Jackson, Michelle Rendall, and the participants of seminars at the University of Adelaide, Monash University, the University of Technology Sydney, and the Fifth Annual Network Science and Economics Conference, Bloomington, April 2019, for their helpful comments. Ushchev acknowledges that the article was prepared within the framework of the HSE University Basic Research Program and funded by the Russian Academic Excellence Project ?5-100?. Publisher Copyright: © 2019 Elsevier Inc.

Keywords: Anti-conformism, Conformism, Local-average model, Network formation, Social norms, Welfare