The old adage is true – we really do spend money to “keep up with the Joneses”. Studies of the psychology – or behavioural economics – of shopping demonstrate purchases by friends, family and neighbours can influence decisions to buy.
Can we afford this neighbourhood?
This eZonomics video explains how peer pressure affects your spending.
In a blogpost for eZonomics, Investors Chronicle writer and economist Chris Dillow details some of the academic studies on peer effects. Dillow goes as far as to say buying an expensive house could end up costing more than expected "to keep up with your rich neighbours."