Journal: Marketing Science (2015)

Hee Mok Park. Co-author: Puneet Manchanda.

In many consumption settings (e.g., restaurants, casinos, theme parks), individuals consume products either alone or with their peers (e.g., friends and/or family members). In such settings, it is likely that through social influence, a consumer’s decision on what to purchase or how much to consume is influenced by the purchase or consumption decisions of their peers.

Marketing researchers have had much interest in measuring such social influence and were primarily focused in estimating how one’s behavior (e.g., how much to spend) is influenced by the behavior of the peer. However, a consumer could not only be affected by the peer’s behavior, but also by other events that influence the peer to change his/her behavior. For example, if the peer gets a promotion, but the focal consumer does not, the focal consumer might judge the differential treatment to be unfair and react negatively. Another mechanism by which social influence could operate could be when the peer is physically present, but does not engage in the behavior under question. In other words, the peer’s presence could directly affect the focal consumer’s consumption behavior as the lack of consumption by the peer may signal a subtle or transient change in preferences. In response to this, the focal consumer may modify her behavior.

The authors develop an empirical model that allows them to identify all three effects simultaneously and apply it to behavioral data from a casino setting. The data comprise detailed gambling activity for a panel of individuals at a single casino over a two-year period. The results show that all three types of peer effects exist. The results also indicate that accounting for these peer effects simultaneously and identifying them at an individual level could help marketing managers draw up better guidelines for promotion policies as well as policy makers implement a more informed regulatory regime for the casino industry.