The bandwagon effect in college students’ online consumer loan behavior: Evidence from a quasi-natural experiment in Shanghai

This study investigates the bandwagon effect—the tendency of individuals to adjust their own borrowing behavior in response to peers’ average consumption levels—in college students’ online consumer loan behavior using survey data from seven universities in a university town in Shanghai. Leveraging the random assignment of dormitories as a quasi-natural experiment, we examine how roommates’ average monthly living expenses influence both the likelihood and amount of students’ online loan use. The results reveal a significant and robust bandwagon effect, even after accounting for alternative mechanisms such as information diffusion, herd mentality, and consumption substitution. Heterogeneity analyses show that the effect is more pronounced among male and upper-year students—groups with higher consumption demand—and among students from urban areas or higher-income households, who have greater access to financial resources. Moreover, the bandwagon effect is weaker among students with higher financial literacy, proxied by majors in finance-related fields. These findings highlight the significant role of peer influence in shaping financial behavior among young adults and underscore the importance of targeted financial education and differentiated policy interventions to promote responsible loan use.