The More the Better? The Influence of Peer Group Size on Financial Decision Making

Abstract

We examine how peer group size influences financial decision-making using a two-stage experiment with two investment tasks conducted over three rounds. Participants initially make individual financial choices before being assigned to small (2-person) or large (4-person) peer groups, where they discuss and make subsequent decisions. By systematically varying group size, we assess whether exposure to more peers improves decision quality through information aggregation or hinders it due to coordination challenges. We employ a difference-in-differences approach to measure the causal impact of group size on investment behavior. Comparing outcomes across rounds, we evaluate whether larger groups enhance decision-making or if smaller groups provide a more effective environment for learning and adaptation. This study contributes to the understanding of peer effects in financial choices, shedding light on whether ``the more, the better'' or ``less is more'' when it comes to social influence in investment decisions.