In order to solve detrimental outcomes resulting from behaviors and preferences, the microeconomic and behavioral literature often consider distinctly an individual alone and external factors which would influence his behavior. For instance wrong choices could be made because of poverty, starvation or low level of education. However, it might be inaccurate to depict individual’s characteristics alone, such as whether he is educated or rich. This type of analysis would assume that economics’ decisions would rely solely on motives and capacities as well as on constraints and that individuals can presumably maximize utility according to their “will”. But what if our preferences perform through preferences from others? This question would assess the possibility that individual’s features are changing through time, depend on others and thus are endogenous.
Despite our uniqueness and individuality, because we are acting in a society, our actions are shaped by others as well as we shape other’s economics’ behavior. Indeed, even though we are all independent individual, free to develop our own aspirations and capable to make our own choices, we can all be categorized into groups regarding our activities, nationality, ideas or status. More precisely we can be included in various social groups such as family, school, friendship, political affiliation, work’s group or sport’s group. A group might impose a set of norms or values in which an individual has a role and has relationships with other members.
It is relevant to capture the impact of social environment and report individual’s choices on a group level. At the end what if we would not be self-choosers? What if our decisions are in a way nudged or influenced constantly by our environment and the interactions we have with others? Is there an individual and a group behavior? Despite the provocative aim of these questions to arouse your interest, considering individuals in groups or categories could give us a better insight for the determinants of choices and in general the technical paths of decision-making.
According to Turner (1981), factually a group exists whenever two individuals define themselves as belonging in the same group and when a third individual acknowledge this existence. “Define themselves” refer to a personal interpretation, therefore belonging to a group or not could reflect the willing for a person to see herself or himself in a group before being an individual. Mills and Clark (1982) define this aspect through the distinction between collectivistic and individualistic culture. In collectivistic culture, people are primarily concerned with relationships and act for the wellbeing of the group they belong, while in individualistic culture, people rather make independent choices and give a priority for the self. The self-perception of whether an individual identify himself as group or individual might therefore impact behaviors.
The self-image is a specificity particularly important in the eyes of Akerlof and Kranton (2000). In their view being part of groups is inevitable and can affect individual’s choices. They include the role of identity into economic behavior models. “A woman working in a man’s job would suffer a loss in utility”. This example refers to inherited individual’s identity, in other words to a social description which is rather stationary. Alternatively, individuals construct goals, projects and aspirations closely related with their own conception of socio-economic achievement. Thus, an individual hypothetically pursues a reference point. We might want to fit in certain groups which represent for us success, happiness or peace. For instance, parents could be a reference group for children or professional athletes for nonprofessional.
Anthropologist, sociologist and psychologist observed various behavioral aspects regarding social group’s influences. They establish and construct numerous theories and experiments to display group’s impact on behaviors on an individual level and its effects on economic outcomes. “The Robber’s Cave” is a famous and fundamental experiment conducted by Sherif et Al. (1961) through several stages. The experiment emphasizes the character variant and volatile of preferences whenever individuals are incorporated into groups. The inter-group relationship passes from a competition relationship to a cooperation relationship. What is important to seize is that volatile character of individuals is in fine depending on the environment and the context individuals are putting into. By appropriating a group identity, individuals are promoting the interests of the group before their own interests. One might conclude, that individuals are subjected to influences and do not control their decisions or behaviors by following a leadership and abolishing their “self”.
Moreover, Steiner (1966) measures the global productivity of a group. By computing a group’s productivity function, he finds that the sum of group’s member contributions is rather dissatisfying. A group’s performance might rely on several parameters such as the good coordination of tasks, the motivations among the members, the global cohesion. Thus, Steiner perceives, because no one of these parameters can operate perfectly, an economic loss and supports the fact that the maximum point of productivity cannot be reached. Contradicting this idea, Charness et al. (2007) show evidence for influence of group membership on individual behavior in strategic games. Indeed, they mainly find that individuals make fewer errors in terms of decisions and perception simply by the fact that in-group individuals can consult with others. In that aspect, by collecting a wide range of opinions, people are capable to take the best out of it. Other group’s member provide a form of guidance. Obviously in a framework of strategic games, players in isolation will have lower outcomes than players being assisted by other individuals.From the two contradictory effects emphasized by Charness and Steiner we can say that a group’s effect might impact positively the outcome of an individual but might affect not in the most efficient way the outcome of the all group.
To conclude, individuals are part of a various range of groups, whether inherited or self-chosen. In this way, interactions existing across in-group and inter-group individuals have a general impact on socio-economic decisions. However, it remains rather complicated to measure interactional effects towards individual’s preferences and behaviors. Although, experiments and studies reviewed above give an insight of these effects, group’s influence is largely conditional on situations and environment. Despite that various economic outcomes might result from group’s influence and there is no clear answer whether it is economically positive or negative. At the end, it would be pertinent to further research and detect through which channels groups might impact individuals: policies, laws, peer effect, stereotypes, fear for social punishment, collectivist values, magnitude of social interactions or simple obedience. For instance, supposedly laws or policies have strong influences, one might think that egalitarian policies or welfare state might deter marginalization or isolation of groups which can occur through stereotypes or prejudices and damage inter-groups cooperation relationships.
Mills, J, & Clark, M. S. (1982). Communal and exchange relationships. Review of Personality and Social Psychology, 3, 121-144.
George Akerlof and Rachel E. Kranton (2000). Economics and Identity. The Quarterly Journal of Economics, vol. 115, issue 3, 715-753
Sherif, M., Harvey, O. J., White, B. J., Hood, W. R., & Sherif, C. W. (1961). Intergroup conflict and cooperation: The Robbers Cave experiment
Steiner (1966). Models for inferring relationships between group size and potential group productivity. Behavioral Science
Charness et al. (2007). Individual Behavior and Group Membership. The American Economic Review, Vol 97, No. 4, pp. 1340-1352