A Note on Endogenous Norms in A Theory of Conformity

This paper analyzes conformist tendencies for a population in which individuals gain utility by mimicking the average behavior, characterizing norms by the mean behavior. In so doing, the model extends Bernheim (1994)’s “A Theory of Conformity” by introducing an endogenous mechanism for establishing social norms. The most interesting result is that this extension does not alter the properties of equilibria established in Bernheim’s initial development, that is, social preferences generally give rise to more concentrated behavior and a conformist pool forms when social preferences are sufficiently prominent. Further the extension introduces no new equilibria, since even though Bernheim’s development included a multiplicity of locations for conformist outcomes, these outcomes are identified exactly by the location of the social norm within the extended model. In addition to illustrating the determinants of conformist behavior with an endogenous reference point, these findings support applied work inferring social norms from average behavior. ∗California Institute of Technology, Division of Humanities & Social Sciences, 1200 E California Blvd, MC 228-77, Pasadena, CA 91125. This paper is taken from my doctoral thesis at the University of California, San Diego. I started this project with a lot of help from Navin Kartik and have benefited from the comments of S. Nageeb Ali, B. Douglas Bernheim, Vincent Crawford, David Miller, Allan Timmermann, and seminar participants at UCSD. I’m particularly grateful for the Research Assistance of Khai Chiong, who helped correct an error in previous drafts. All remaining mistakes are my own. Comments, feedback, and suggestions are welcome at [email protected].