The Effect of Social Interaction on Economic Transactions: an Embarrassment of Niches?
Abstract: We show that reducing social interaction increases the diversity of products purchased by consumers in two retail settings. First, we consider a field experiment conducted by Sweden's monopoly alcohol retailer and find that moving purchases from behind the counter to self-service disproportionately increases the sales of difficult-to-pronounce products. Second, we use individual-level panel data from a pizza delivery restaurant to show that online orders have more complexity, calories, and diversity, and measure the consequences for consumer and producer surplus. Combined, these results suggest that social frictions can substantially affect market outcomes.
