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The Effects of Social Pressure on Fundamental Choices: Indecisiveness and Deferral

Alfio Giarlotta, M. Ali Khan, Angelo Enrico Petralia, Francesco Reito

TL;DR

The paper addresses how social pressure and indecisiveness shape fundamental, non-recurrent choices. It advances a two-stage model where an initial indecisive stage uses a one-many ordering to form a bounded consideration set, followed by a decisive stage that maximizes a comprehensive utility including present and expected future social costs. The authors establish existence results for both standard and deferral equilibria, analyze welfare losses from deferral in multi-agent settings, and illustrate symmetry and conformist dynamics in a two-agent case. This framework illuminates welfare implications of social conformity in life-cycle decisions and provides avenues for belief updating and large-game analysis in future work.

Abstract

In mainstream neoclassical economics, utility maximization is the only engine of individual action, and the other or the social, if it is modeled for decisions deemed fundamental, it is done as a tacit externality parameter affecting an agent's maximized payoff. And even when hitched to a social reference point, a fully decisive and immediate response is invariably assumed. In this paper, we propose a non-standard articulation of the trade-off between personal utility and social distance, one motivated by experimental evidence from psychology, management science, and economics. Our approach deconstructs non-recurrent consumer choice to two stages: a non-decisive first stage in which a binary relation, called one-many ordering, yields an interval, the consideration set, to which the deferred choice is confined; a decisive second stage in which the distance from the average social choice, and future social expectations, are taken into account in present utility. Finally, we embed this indecisive consumer in an exploratory game-theoretic setting, and show that indecisiveness and choice deferral may cause social loss.

The Effects of Social Pressure on Fundamental Choices: Indecisiveness and Deferral

TL;DR

The paper addresses how social pressure and indecisiveness shape fundamental, non-recurrent choices. It advances a two-stage model where an initial indecisive stage uses a one-many ordering to form a bounded consideration set, followed by a decisive stage that maximizes a comprehensive utility including present and expected future social costs. The authors establish existence results for both standard and deferral equilibria, analyze welfare losses from deferral in multi-agent settings, and illustrate symmetry and conformist dynamics in a two-agent case. This framework illuminates welfare implications of social conformity in life-cycle decisions and provides avenues for belief updating and large-game analysis in future work.

Abstract

In mainstream neoclassical economics, utility maximization is the only engine of individual action, and the other or the social, if it is modeled for decisions deemed fundamental, it is done as a tacit externality parameter affecting an agent's maximized payoff. And even when hitched to a social reference point, a fully decisive and immediate response is invariably assumed. In this paper, we propose a non-standard articulation of the trade-off between personal utility and social distance, one motivated by experimental evidence from psychology, management science, and economics. Our approach deconstructs non-recurrent consumer choice to two stages: a non-decisive first stage in which a binary relation, called one-many ordering, yields an interval, the consideration set, to which the deferred choice is confined; a decisive second stage in which the distance from the average social choice, and future social expectations, are taken into account in present utility. Finally, we embed this indecisive consumer in an exploratory game-theoretic setting, and show that indecisiveness and choice deferral may cause social loss.
Paper Structure (10 sections, 6 theorems, 16 equations, 4 figures)

This paper contains 10 sections, 6 theorems, 16 equations, 4 figures.

Table of Contents

  1. Introduction
  2. Preliminary notation and set-up
  3. The individual's problem
  4. Indecisiveness
  5. Final choice
  6. Game-theoretic setting
  7. The general case
  8. Two agents
  9. Concluding remarks
  10. Appendix: Proofs of results

Key Result

Proposition 1

Assume $u$ is strictly quasiconcave, $c_1$ is increasing in $\delta$, and let $\delta$ be the euclidean distance on $\mathbb{R}_{+}$. When $x_{s}=x^{\star}$, $\max(\mathbb{R}_{+},\succcurlyeq)=x_{s}=x^{\star}$. Otherwise, $\max(\mathbb{R}_{+},\succcurlyeq)= [\min\{x_{s},x^{\star}\},\max\{x_{s},x^{\s

Figures (4)

  • Figure 1: The agent's decision process
  • Figure 2: The alternative $\widehat{x}$ falls in the optimality interval (the red segment).
  • Figure 3: Extreme beliefs may move $\widehat{x}$ out of $[\min\{x_{s},x^{\star}\},\max\{x_{s},x^{\star}\}]$.
  • Figure 4: The best response functions respectively of the first agent (the red line), and of the second agent (the blue line). The blue dot is the equilibrium, and the red segment delimited by the red brackets is the set of the equilibria after deferral.

Theorems & Definitions (14)

  • Proposition 1
  • Proposition 2
  • Remark 1
  • Definition 1
  • Definition 2: Garcia-SanzAlcantud2015
  • Definition 3
  • Proposition 3
  • Definition 4
  • Definition 5
  • Proposition 4
  • ...and 4 more