We propose a theory of peer pressure based on existing signaling models of esteem. Focusing in particular on the model devised by Benabou and Tirole (2006, 2011), we analyze how the incentives to perform a status enhancing task change as the distribution of peers' attributes changes. We provide comparative statics on the effects of an increase in the average quality of peers, an increase in the heterogeneity of peers, and other manipulations of the peers' distribution. We find that a change in average peers' quality may generate both a ``keeping up with the Jonses'' effect, where better peers increase one's incentive to perform the task, but also a ``big fish in a little pond'' effect, where better peers cause discouragement. Which effect emerges depends on the difficulty of the task and on the precise shape of the distribution of peers' ability (unimodal, bimodal). In contrast with the result on average peers' quality, we find that an increase in peers' heterogeneity unambiguously increases the incentives to perform the task. We discuss applications to education, racial segregation, and conspicuous consumption.

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