On Peer Effects: Behavioral Contagion of (Un) Ethical Behavior and the Role of Social Identity

Social interactions and the resulting peer effects loom large in both economic and social contexts.  This is particularly true for the spillover of (un)ethical behavior in explaining how behavior and norms spread across individual people, neighborhoods, or even cultures. Although we observe the outcomes of such contagion effects, little is known about the drivers and the underlying mechanisms, especially with respect to the role of social identity with one’s peers and the (un)ethicality of behavior one is exposed to. We use a variant of a power-to-take dictator game to shed light on these aspects in a controlled laboratory setting. Our experiment contributes to the existing literature in two ways: first, using a novel approach of inducing social identification with one’s peers in the lab, our design allows us to analyze the spillover-effects of (un)ethical behavior under varied levels of social identity. Second, we study whether contagion of ethical behavior differs from contagion of unethical behavior. Our results suggest that unethical behavior is more contagious than ethical behavior and that the extent of social identification to one’s peers particularly drives the contagion of unethical behavior. Our findings yield strong policy implications with regards to nudging both more pro-social and less anti-social behavior.