Social Learning in the COVID-19 Pandemic: Community Establishments' Closure Decisions Follow Those of Nearby Chain Establishments

Abstract

As conveners that bring various stakeholders into the same physical space, firms can powerfully influence the course of pandemics such as COVID-19. Even when operating under government orders and health guidelines, firms have considerable discretion to keep their establishments open or closed during a pandemic. We examine the role of social learning in the exercise of this discretion at the establishment level. In particular, we evaluate how the closure decisions of chain establishments, which are associated with national brands, affect those of proximate, same-industry community establishments, which are independently owned or managed. We conduct these analyses using cellphone location tracking data on daily visits to 230,403 U.S.-based community establishments that are co-located with chain establishments affiliated with 319 national brands. We disentangle the effects of social learning from confounding factors by using an instrumental variables strategy that relies on local variation in community establishment's exposure to closure decisions made by brands at the national level. Our results suggest that closing decisions of community establishments are affected by the decisions made by chain establishments: a community establishment is 3.5% more likely to be open on a given day if the proportion of nearby open chain establishments increases by one standard deviation.

Publication
Management Science (Forthcoming)