The Effect of Social Comparison on Debt Taking : Experimental Evidence
A number of studies show a link between social comparison and high levels of household debt. However, the exact underlying mechanisms are not yet well understood. In this paper, we disentangle two mechanisms in a lab experiment to study the effects of social image concerns and peer information on debt-financed consumption choices. We find that having to announce their consumption decisions publicly does not make participants more likely to take on debt but makes them more likely to buy a lower quality product than they can afford. We find no significant effects for information about other participants consumption on choices