Misspecified beliefs and the evolution of peer pressure (opens in new tab)

We study the emergence of conformity preferences in an environment in which agents choose effort under heterogeneous, possibly misspecified returns, and social interactions do not directly affect material payoffs. Some agents choose effort by trading off performance and conformity to expected peer behavior. We characterize subjective best responses. For any given beliefs, an optimal and unique level of peer pressure exists and is evolutionarily ...