What is Social Interaction Effects

Direct social interactions between economic agents (people) are important in determining their choices. When choosing a new car, you will likely ask some of your friends or acquaintances what their opinion is on different types and brands of cars. When choosing a new photo camera, you are likely to visit an Internet forum to see what other peoples’ opinions are on the different brands and types of cameras. These are examples of social interaction. Social interaction effects are therefore important in determining buying behavior. The rise of the Internet has considerably facilitated such social interactions, making social interaction effects even more important.