This dissertation presents three experimental studies with an emphasis on peer influence in people’s behavior. The first chapter studies a mechanism that facilitates team formation and cooperation among peers. The second and third chapters focus on peer influence in altruistic behavior such as donations to charities and street performers.

The first chapter implements a field experiment in a digital environment with a matching mechanism that facilitates user-team assortativity. Using machine learning techniques, our system identifies users with high expected values and provides them the option to join highly active social groups in terms of engagement and expenditure. We deploy this mechanism experimentally in a popular online game. We find that assortative matching significantly increases new user engagement and productivity, and improves the overall health of the community. New users who join more active communities do exhibit higher engagement and productivity, but do not spend more money. Revenue, however, does increase as existing members of high-activity teams react positively to the influx of new, better-quality users. Teams matched with low-quality new users are negatively impacted leading to a more segregated team environment. We discuss implications of these findings both from a profit-maximizing firm’s as well as a broader societal perspective.

The second chapter provides laboratory evidence on how different levels of monetary rewards affect image motivations in the context of charitable donations. We specifically study the interaction effect of image and material motivations on donation decisions. We implement a within-subject design with two treatments: monetary incentive and donation visibility. We have three levels of monetary incentives: no incentive (0% rebate), a low incentive (10% rebate), and a high incentive (50% rebate). We also have three levels in donation visibility: private donation, public donation without costly non-disclosure (ND) option, and public donation with costly non-disclosure option. Our results show that a small reward in terms of a 10% donation rebate does not impose any significant donation behavior changes, neither in private nor in public. When a large reward is given (50% donation rebate), people’s perception of the monetary reward determines whether the reward crowds out donations. For those who believe the reward makes their donations appear ‘less generous’, a 50% rebate significantly crowds out charitable donations in public. For those who do not associate monetary rewards with a negative image, a high rebate significantly increases their donations in public. We also find that males, in general, are more sensitive to their public images and significantly reduce their donations in public when offered a high reward, while the effects on females are non-significant.

The third chapter evaluates the impact of peers’ giving behavior on people’s willingness to donate. We implement a field experiment studying donations to street performers at stoplights on the streets of Lima, Perú. The treatment condition is defined as observing another vehicle making a donation. We use natural variation in donations made by passing-by drivers, as well as experimentally-manipulated variation in donations made by hired drivers. We study how observing a donation from another vehicle affects the probability and magnitude of donations of treated vehicles. Our experiment results indicate a strong substitution effect of peer influence. When drivers observe another vehicle donate, they are significantly less likely to make a donation to the same performer and overall average donations are lower as well. Our study contributes to the literature by bringing evidence of peer influence in donations in a developing world context.