The impact of economic inequality on consumers’ desire for conspicuous consumption

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The impact of economic inequality on consumers’ desire for conspicuous

consumption

University of Groningen

Faculty of Economics and Business

Master Thesis, MSc Marketing Management

Completion date: June 13th, 2019 First Supervisor: dr. S.A.E.G. Albalooshi

Second supervisor: dr. J.A. Voerman

Jacko ter Voorde Houtweg 40

9936BL Farmsum, The Netherlands +31 6 40 68 25 36

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Abstract

The aim of this thesis is to explore the impact of economic inequality on consumers’ desire for conspicuous consumption. Simply said, literature suggests that high economic inequality leads to status being more salient, while one of the main motives for engaging in conspicuous consumption is to signal status. Because of this, hypothesized was that high economic inequality leads to a higher willingness to pay for conspicuous products. Results show that high economic inequality, in comparison to low economic inequality, does not lead to a significantly higher willingness to pay for conspicuous products. Consumers are, however, willing to pay significantly more for conspicuous products in comparison to non-conspicuous products. Possible explanations for why the results are not in line with the hypothesis and literature are discussed, also looking at the limitations of this study. This in turn paves the way for future research, by giving a more specific direction to future research. The findings of the research do, apart from the insignificant results, have some interesting managerial and practical implications.

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Preface

Developing the thesis you are about to read, on the impact of economic inequality on consumers’ desire for conspicuous consumption, was the final step to completing my Master’s degree in Marketing Management at the University of Groningen. I would not have been able to develop this thesis and conduct the research needed for this thesis without the guidance and help of my supervisor dr. Sumaya Albalooshi. Because of this, I would like to thank her very much for all the guidance, useful feedback, motivation, time and knowledge that she has provided me with. Furthermore, I would like to thank my second supervisor dr. Liane Voerman in advance, for taking the time to assess my thesis as well. I would also like to thank my friends, peers, family and girlfriend for the amazing support they offered me during the writing of this theses. Even though the writing drove me insane sometimes, they drove me back to sanity. A special shoutout goes to MiCaffe at the Duisenberg building for keeping me awake with their amazing coffee during long days. Altogether, I will look back at a period in which I truly learned a lot, a period in which I met wonderful people and a period that allowed me change from a student to a young professional.

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List of Figures

Figure 1: Conceptual model ... 13

Figure 2: 2x2 between-subjects factorial design ... 14

Figure 3: Hypotheses along with statistical analysis methods ... 19

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1. Introduction

The existing body of literature on economic inequality — the extent to which wealth, pay and income is concentrated in the hands of a small portion of the population (Pickett & Wilkinson, 2015; Trust, 2019) — has grown significantly over the last couple of years. This is no surprise, since numbers show that the gap between the rich and the poor, in terms of both pay, income and wealth, has been increasing and is being felt more and more by the lower and middle classes of society (Reinicke, 2018). Simply said, the rich are becoming wealthier while the poor are becoming less wealthy. To put this into perspective, the richest families (1% of the population) in the United States made at least 25 times what the other families did (99% of the population). While economic inequality significantly lowered after the Great Depression, it is now rapidly rising since the recovery of the Great Recession. Even though this trend is not existent in all countries of the world, it is in the majority of them, with the United States being one of the strongest (Hasell, 2018).

This 21st century global trend, and the heightened awareness of economic inequality, has thus increased the interest of researchers in the effects of economic inequality. Research shows that many of the outcomes of high economic inequality are negative and related to self-defeating decision making in terms of money (Payne, Brown-Iannuzzi, & Hannay, 2017). The basis of some further answers to understanding how economic inequality leads to self-defeating decision making in terms of money might partly lie in prior research done in the field of consumer psychology and brand management. This research, for example, has shown that consumers engage in conspicuous consumption — the expenditure on, or consumption of, conspicuous products (i.e.: luxury high-status products) on a lavish scale in an attempt to signal and/or enhance one’s prestige and/or status (Rucker & Galinsky, 2009) — , even if they are not able to afford such consumption, in order to repair their threatened ego (Sivanathan & Pettit, 2010) and in order to signal status (Rucker & Galinsky, 2008). However, are consumers always inclined to signal status? The researcher does not believe so.

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arousal. It might thus very well be that the signaling of status by means of conspicuous consumption, is simply a phenomenon which occurs under high economic inequality conditions. Strengthening this possible notion even more is research which has shown that the effects of economic inequality only emerge once high economic inequality is felt. Since the effect of economic inequality on consumer behavior is a psychological process, it requires a psychological input (Oshio & Urakawa, 2014). Studies show that the perception of inequality is more important than actual objective measures of inequality (Cruces, Perez-Truglia & Tetaz, 2013; Kuziemko, Norton, Saez & Stantcheva, 2015).

Based on the findings of existing literature on the topic of economic inequality and conspicuous consumption, there seems to be a relationship between the two concepts. The aim of this research is therefore to further investigate this relationship, finding out if conspicuous consumption is one more example of a self-defeating decision in terms of money caused by high economic inequality. Therefore, the question this research will address is: Does economic inequality influence consumers’ desire for conspicuous consumption? By addressing this question, the paper will contribute to both research on conspicuous consumption and economic inequality. It will help clarify another condition and reason for the engagement in conspicuous consumption. Furthermore, it will clarify that there might be even more negative outcomes of high economic inequality than already is known, increasing the knowledge on these phenomena even more.

2. Theoretical Framework

The theoretical framework chapter will discuss the already existing body of literature on economic inequality (2.1), conspicuous consumption (2.2) and relate it to the topic of this research. In addition, hypotheses will be formed and clarified, posing potential relationships between these concepts (2.3).

2.1 Economic Inequality

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Since a lot of research on the topic of economic inequality refers to income inequality, this concept is easily confused with economic inequality and thus, the researcher believes, first deems further clarification. Even though both are related, it is wise to understand the exact differences and relationships between the two. Economic inequality exists out of three types of inequality: (1) wealth inequality, defined by Trust (2019) as “the broader concept of overall wealth distribution between the wealthiest top 1 percent and bottom 99 percent of families. Wealth refers to the total amount of assets of an individual or household. This may include financial assets, such as bonds & stocks, property & private pension rights. Wealth inequality therefore refers to the unequal distribution of assets in a group of people” (p. 5); (2) pay inequality, defined by Trust (2019) as “a person’s pay is different from their income. Pay refers to payment from employment only. This can be on an hourly, monthly or annual basis, is typically paid weekly or monthly and may also include bonuses” (p 4); and (3) income inequality, referring to the gap in income distribution between the top 1% and bottom 99% of families in terms of income (Buttrick, Heintzelman, & Oishi, 2017). In addition, Trust (2019) notes that “It is important to note that income is not just the money received through pay, but all the money received from employment (i.e.: wages, salaries, bonuses), investments, such as interest on savings accounts and dividends from shares of stock, savings, state benefits, pensions (i.e.: state, personal, company) and rent” (p. 3). It thus becomes clear that economic inequality and income inequality are different concepts and that income inequality is just one determinant of economic inequality.

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It is also interesting and important to understand that since the effects of inequality are caused by a psychological process, they require a psychological input (Oshio & Urakawa, 2014). This means that, even though economic inequality might be high, one might not experience it that way. If one does not perceive inequality, he or she will neither suffer nor benefit from it (i.e.: will experience little or no effects at all). This notion is referred to as perceived economic inequality. Because of this, some studies state that the perception of inequality is even more important than the actual objective measures of inequality (Cruces, Perez-Truglia & Tetaz, 2013; Kuziemko, Norton, Saez & Stantcheva, 2015). If one does not perceive economic inequality as high, or simply is in peace with the situation at hand, there will be little or no effects of economic inequality and it will thus be impossible for the researcher to find effects caused by economic inequality. Prior research has already found certain situations in which individuals experienced little or no effect at all due to economic inequality. For example, Joshanloo & Weijers (2016) found that when high economic inequality is perceived as god’s plan by religious people, they neither benefit nor suffer from any effects. Via a multi-level analyses on 85 nations across the world and 27 European nations they found that religiosity decreases the negative influence of economic inequality on life satisfaction. Their findings also indicated that it is religious belief, not religious practice, that functions as a buffer in the relationship between economic inequality and life satisfaction. Furthermore, Napier & Jost (2008) found that political orientation also affects to what extent people are affected by the effects of economic inequality. They found that conservatives are overall happier than liberals and that conservatives possess some kind of buffer against the negative hedonic effects of economic inequality. In addition, research has found that when inequality is perceived as unimportant (Guillard, 2013), legitimate (Schneider, 2012), surmountable (Alesina, Di Tella, & MacCulloch, 2004), beneficial (Napier & Jost, 2008) or fair (Bjornskov, Dreher, Fischer, Schnellenbach, & Gehring, 2013) a person will experience no effects either.

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social upward comparison. Furthermore, they also found from large scale data that risk taking was higher in states with higher economic inequality. This research already found that inequality may promote poor outcomes, partly by increasing risky behavior. Still, the body of literature clarifying the self-defeating decisions in terms of money caused by high economic inequality does not end here. Choe (2008) found that high economic inequality also increases crime rates. For a number of countries, they analyzed time-series data and looked for significant positive associations between times of high economic inequality and high crime rates. Specifically, they found that property crime increases with rising economic inequality as well as specific measures of violent crime, such as homicide and robbery. Like this isn’t enough, research also found that high economic inequality also leads to greater consumer debt (Frank, 2013) and higher rates of self-destructive gambling (Freund & Morris, 2006). High economic inequality does not only lead to self-defeating decision in terms of money; according to research high economic inequality is also associated with social and health problems, such as higher rates of violence (Kawachi & Subramanian, 2014), drug use (Marmot & Sapolsky, 2014) and shorter life expectancies (Pickett & Wilkinson, 2015).

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likely to portray a higher desire for conspicuous consumption in conditions of high economic inequality, even if they are not able to afford such consumption.

2.2 Conspicuous Consumption

In 2005, a strawberry picker named Alberto Ramirez, earning around $400 a week, bought a villa for as little as $720.000. This is the ideal example to highlight the ridiculous extravagance known as conspicuous consumption (Wagner, 2008). Conspicuous consumption is defined in this research as the expenditure on, or consumption of, conspicuous products (i.e.: luxury high-status products) on a lavish scale in an attempt to signal and/or enhance one’s prestige and/or status (Rucker & Galinsky, 2009). Before we continue, it is wise to discuss what exactly conspicuous products are. According to Heffetz (2007) “the higher the visibility of a good, the more likely it is to be a luxury (i.e.: conspicuous) product” (p. 1101). He found that, people spend more on luxury cars, fancy clothing and jewelry, three highly visible conspicuous products, as their income rises. While they spend less money on home utilities, being a low visible non-conspicuous category, as their income rises. In addition, Shipman (2007) talks about other characteristics of conspicuous products, being: high symbolic value, limited reproducibility, high price and overall quality over quantity. Overall, we can state that conspicuous products are products that signal a high level of status due to their unique presence and position in the social hierarchy.

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conspicuous consumption enhances feelings of status and self-esteem. It might, however, come as a surprise that conspicuous products actually result in status related benefits. The research by Lee, Ko & Megehee (2015) has shown that people wearing conspicuous products not only have a higher chance of getting a job during a job interview, but overall are seen as wealthier and as having a higher social status. They furthermore are more likely to receive a preferential treatment and receive more charitable donations. This phenomenon is mainly caused by the portraying of authority and success. People wearing (i.e.: and using, consuming, etc.) conspicuous products are often seen as more successful and higher up in the social hierarchy (Veblen, 1899).

It is interesting to note that while both the ‘rich’ and the ‘poor’ spend their hard-earned cash on conspicuous products, especially the ‘poor’ spend most of their money on conspicuous products. They do not engage in this conspicuous consumption for the utilitarian purposes those conspicuous products offer, but because of the status which it signals (Veblen, 1899; Banerjee & Duflo, 2007). Hamilton & Tilman (1983) found that the ‘rich’ engage in conspicuous consumption as a habit belonging to their social class and furthermore found that the rich not only engage in conspicuous consumption for symbolic reasons, but for utilitarian reasons as well. The same cannot be said about the ‘poor’, who mainly engage in conspicuous consumption for symbolic reasons. This phenomenon is partly clarified by research conducted by Rosenberg & Pearlin (1978) and Sivanathan & Pettit (2010). The former found that people in higher classes overall show higher levels of self-esteem, while those in the lower classes overall show lower levels of self-esteem and higher levels of threat to the self (Rosenberg & Pearlin, 1978). While the latter showed that individuals consume conspicuous products in order to repair their ego from a threat. They conducted multiple studies and showed that: (1)

individuals that experienced a threat to the self, showed a higher willingness to pay for conspicuous products in order to restore their self-esteem; (2) this effect is also apparent for individuals with a low-income that are not able to afford conspicuous consumption; and (3) these conspicuous products protected their egos from future threats (Sivanathan & Pettit, 2010).

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Becker, 2006). Research has even found that the pain-free experience of shopping on credit and the constant desire to combat self-threat through conspicuous consumption strengthen each other through an interactive effect. As was hypothesized, researchers found that a threat to the self drives consumers to engage in conspicuous consumption, with a preference for credit over cash. Furthermore, an interaction effect between self-threat, product status and payment method makes for the extreme situation in which consumers not only engage in conspicuous consumption, but do so by means of credit making, thus making them spend even more due to the painless experience (Nathan & Sivanathan, 2012).

2.3 Hypothesis

When putting the pieces together, one can now see a possible relationship forming between economic inequality and conspicuous consumption. Remember that high economic inequality leads to a wide variety of (status related) self-defeating decisions in terms of money and that conspicuous consumption can turn into a self-defeating decision in terms of money. Also note that Andersen & Curtis (2012) argue that status becomes more salient under conditions of high economic inequality, people mainly engage in conspicuous consumption in order to signal status and people show a higher interest and arousal for high-status products under conditions of high economic inequality. This combination of concepts indicates that conspicuous consumption might be just another self-defeating decision in terms of money, which especially occurs under high economic inequality conditions. To be more specific, it might be that, if economic inequality is high, consumers show a higher willingness to pay for conspicuous products, in comparison to low economic inequality. While this notion does not hold for non-conspicuous products, since these have no status-signaling function. This idea gives rise to the following hypothesis:

H1: In high economic inequality conditions, consumers portray a higher willingness to pay for

conspicuous products, in comparison to low economic inequality conditions.

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3. Methodology

In this chapter the methodology for the research will be described, giving a clear picture of how the research was conducted. The chapter will elaborate on the chosen experimental design (3.1), the sample (3.2), the manipulations & measures (3.3), the data collection procedure (3.4), the manipulation checks (3.5) and finally the planned data analysis (3.6). By means of an experiment, the research aimed to find out whether the level of economic inequality influences consumers’ willingness to pay for conspicuous products.

3.1 Experimental Design

In order to answer the earlier mentioned hypothesis, an experiment in a controlled environment was conducted. With the controlled environment being an online survey. A 2 (economic inequality: high vs. low) x 2 (type of product: conspicuous vs. non-conspicuous) between-subjects factorial design was chosen (Blumberg, Cooper, & Schindler, 2011). This 2 x 2 between-subjects factorial design provides the researcher with 4 different groups (figure 2) of which each participant only saw one (i.e.: each participant was randomly assigned to one of the four groups and only saw the conditions related to that group). The researcher manipulated economic inequality & type of product, and for each combination of those two measured the willingness to pay for the product.

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3.2 Sample

Data was gathered from 250 respondents, of which 187 (57% male, 43% female; Mage = 36; SD = 11.30) were left after cleaning the dataset. More info on the cleaning of the dataset can be found in chapter 4.1 and Appendix 1. An American sample was chosen, which was reached via the platform of Amazon Mechanical Turk (MTurk). Participants were paid for participating in the survey ($0,70 per respondent) (Amazon Mechanical Turk, 2019). The platform of Amazon Mechanical Turk allowed the researcher to make use of simple random sampling. Simple random sampling allows one to take a single random sample of a given population, resulting in a statistically representative sample for that particular population. It can only be used when the population is available and sufficiently large, which was the case (Straker, 2019).

3.3 Measures & Manipulations

3.3.1 Economic Inequality

Economic inequality was manipulated (high vs. low) in the experiment based on the research of Cote, House & Willer (2015), who clearly describe a robust and pre-tested manipulation of inequality. First of all, participants were asked to answer a host of demographic questions. These demographic questions served as control variables (more on control variables in chapter 3.3.4) and in addition complemented the cover story. Participants were told that based on the answers they gave, they were presented with economic inequality information based on their situation. This was not truly the case.

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3.3.2 Type of Product

The type of product was manipulated as well (conspicuous vs. non-conspicuous). The research of Sivanathan & Pettit (2010) and the research of Rucker & Galinsky (2008) provided the researcher with a robust manipulation of the type of product. The type of product was manipulated by displaying (i.e.: in a picture) and describing a conspicuous high-status unisex sweater (i.e.: a Gucci sweater) in the conspicuous product condition and displaying and describing an identical (in order to prevent confounds) but non-conspicuous low-status unisex sweater (i.e.: an H&M sweater) in the non-conspicuous product condition. Please note that the conspicuous product chosen is in line with how Heffetz (2007) and Shipman (2004) define a conspicuous product. A manipulation check was conducted on which more info is given in chapter 3.5. A visual representation of the manipulation can be found in Appendix 3, while the complete manipulation can be found in Appendix 4.

3.3.3 Willingness to Pay

Willingness to pay, the dependent variable, was measured for all four different groups. For a reliable measure the researcher turned to the paper by Breidert, Hahsler & Reutterer (2006), in which they reviewed methods for measuring willingness to pay. They clarify that there are many different measures, ranging from revealed preference measures to states preference measures. For this particular experiment, stated measures of preference, and more specifically, direct surveys seemed most appropriate. From the findings of this article it becomes clear that researchers believe there is a maximum and minimum price for each product, which can be obtained by directly asking participants, a psychologically motivated method for estimating willingness to pay (Stoetzel, 1954). Le Gall-Ely (2009) also describes this, so called open-ended contingent valuation, as a measure to determine willingness to pay by means of the question “Please indicate the highest price you would be willing to pay for this product”.

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3.3.4 Control Variables

Joshanloo & Weijers (2016) found that religiosity influences the effects of economic inequality. Therefore, the researcher controlled for it by measuring religiosity on a 7-point semantic differential scale (1: not religious at all, 7: very religious). Furthermore, Napier & Jost (2008) found that political orientation also affects the effects of economic inequality. Thus, in order to control for the effects of political orientation, participants were asked to indicate their political orientation on a 7-point semantic differential scale (1: very conservative, 7: very liberal). In addition, certain other demographic variables were measured in order to control for them and increase the accuracy and explained variance of the analysis.

3.3.5 Attention Checks

The experiment also contained multiple attention checks. The first check was incorporated right after the manipulation of economic inequality, in which participants were asked whether they understood the information that was presented to them. They were also asked to indicate the percentages of the total available wealth per fifth, in order to make sure they payed attention to the presented graph. The second check was incorporated at the end of the survey, in order to make sure that participants payed attention to the questions and didn’t just skip through the questions in an effortless fashion. The participants were asked a typical attention check question (i.e.: a somewhat misleading question if the participant only reads the title and not the full description) and were asked how attentive they were during the experiment. In order to make sure that the manipulations were effective, participants were also asked whether they left the computer during the completion of the survey, and if they left, when they left. Participants that did not answer the attention check questions correctly and/or sufficiently were deleted prior to the analysis (Appendix 1).

3.4 Data Collection Procedure

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in a way to aid the researcher (Crano, 2011). They were furthermore asked whether they truly want to participate in the research. If not, they were automatically redirected out of the survey. Once they continued they were presented with the first part of the study. According to the cover story, the first part of the study aimed to explore individuals’ opinions regarding wealth distribution in their states of residence. The participants were asked to answer a host of demographic questions (i.e.: of which some serve as control variables) and were told that based on the answers they gave, they were presented with economic inequality information (i.e.: from a database) based on their situation. This is not true. After answering the demographic questions, the participants were then randomly assigned to either a high or low economic inequality situation. They were presented with the graphical manipulation circle diagrams as proposed by Cote, House & Willer (2015), along with a description of the situation. They were asked whether they understood the information that was presented to them, an attention check was done in order to make sure that they payed attention to the graph and a manipulation check was conducted.

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3.5 Manipulation Checks

In order to make sure that the manipulation of the type of product was successful, a manipulation check was conducted. This is recommended by Sivanathan & Pettit (2010), from which the manipulation was taken. After participants were presented with either the conspicuous high-status unisex sweater (i.e.: the Gucci sweater) or the identical but non-conspicuous low-status unisex sweater (i.e.: the H&M sweater) they were then asked to indicate, on a 7-point semantic differential scale, how conspicuous they found the sweater. By means of an independent sample t-test the means were compared in order to indicate whether it was a successful manipulation. A manipulation check was conducted for the manipulation of economic inequality as well. After participants were presented with either the low or high economic inequality situation, they were asked to indicate the level of economic inequality they felt they were in on a 7-point semantic differential scale. Again, by means of an independent sample t-test the means were compared in order to indicate whether it was a successful manipulation. The results of the manipulation checks are presented in chapter 4.2.

3.6 Planned Data Analysis

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4. Results

In this chapter the results of the research are presented. Below, first of all, the cleaning of the dataset will be covered; clarify exactly why and how many participants were removed during the cleaning of the dataset (4.1). Then, second of all, the findings of the manipulation check are presented, clarifying whether both the manipulations of economic inequality and type of product were successful (4.2). Last of all, the findings of the 2 x 2 between-subjects factorial analysis of variance (Two-Way ANOVA) on willingness to pay, by which the main hypothesis was tested (4.3.1), are presented. In addition, a 2 x 2 between-subjects factorial analysis of covariance (Two-Way ANCOVA) on willingness to pay was conducted in order to control for different demographic variables (4.3.2).

4.1 Cleaning of the Dataset

In total, 250 participants participated in the experiment. After the cleaning of the dataset, 187 of those 250 participants were left. Below, further information is given on exactly why and how many participants were removed during the cleaning of the dataset. A short overview can be found in Appendix 1 as well.

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4.2 Manipulation Checks

4.2.1 Economic Inequality Manipulation Check

In order to make sure that the manipulation of economic inequality was successful (i.e.: in order to make sure that the high economic inequality condition was felt as significantly higher than the low economic inequality condition), a manipulation check was conducted. More specifically, an independent sample t-test was conducted, in order to find out whether participants experienced the high economic inequality condition as significantly higher than the low economic inequality condition. The feeling of economic inequality for participants in the high economic inequality condition (M = 5.91, SD = 1.14) was significantly higher than the feeling of economic inequality for participants in the low economic inequality condition (M = 3.49, SD = 1.65; t(185) = 11.81, p < .001). When looking at the results of the independent sample t-test, it becomes clear that the manipulation of economic inequality was successful.

4.2.2 Type of Product Manipulation Check

A manipulation check was conducted for the type of product as well, in order to check whether the conspicuous product was seen as significantly more conspicuous than the non-conspicuous product. Again, an independent sample t-test was conducted. Participants that were shown the conspicuous product (M = 5.39, SD = 1.72) indicated it to be significantly more conspicuous than participants that were shown the non-conspicuous product (M = 2.42, SD = 1.62; t(185) = 14.28, p < .001). The researcher can therefore state that the manipulation of the type of product was successful as well.

4.3 Main Analysis

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4.3.1 Two-Way ANOVA

The output of the two-way ANOVA showed the main effect of the type of product to be significant (F(1,183) = 15.430, p < .001, η²p = .078). Overall, a conspicuous product leads to a significantly higher willingness to pay (M = 37.87, SD = 50.37) in comparison to a non-conspicuous product (M = 17.61, SD = 11.11). There is, however, no significant main effect of economic inequality (F < 1). Overall, high economic inequality (M = 29.15, SD = 49.22) does not lead to a significantly higher willingness to pay in comparison to low economic inequality (M = 26.46, SD = 21.57). In addition, the predicted interaction did not appear significant either (F < 1), meaning that the willingness to pay for a type of product is not dependent on the level of economic inequality.

The most important conclusions that can be drawn from the findings of the ANOVA are the following: (1) Overall, the type of product has a significant influence on willingness to pay, with as expected, a higher willingness to pay for conspicuous products in comparison to non-conspicuous products; (2) Overall, the level of economic inequality does not have a significant influence on the willingness to pay. Expected was that high economic inequality leads to a higher willingness to pay, especially for conspicuous products. This is, however, not the case according to the results of the ANOVA; and (3) In contrast to what was expected, there is no significant interaction effect between the type of product and the level of economic inequality; Meaning that the two independent variables are not dependent on each other, so the willingness to pay for a type of product is not dependent on the level of economic inequality.

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Figure 4: Estimated marginal means for willingness to pay per condition

4.3.2 Two-Way ANCOVA

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5. Discussion

Prior research found that economic inequality, more specifically high economic inequality, leads to many negative outcomes, with one of them being self-defeating decisions in terms of money (Payne, Brown-Iannuzzi, & Hannay, 2017). Prior research also found that high economic inequality makes status more salient and that consumers engage in conspicuous consumption in order to signal status (Andersen & Curtis, 2012; Rucker & Galinsky, 2008). Based on these findings and further literature on conspicuous consumption and economic inequality, conspicuous consumption was speculated to be just another self-defeating decision in terms of money caused by high economic inequality. Therefore, hypothesized was that consumers show a higher willingness to pay for conspicuous products (i.e.: since these signal status, whereas non-conspicuous products do not) in conditions of high economic inequality, in comparison to conditions of low economic inequality. The findings of this research, however, do not support this hypothesis. Even though, both the manipulation of the type of product and the level of economic inequality were successful, consumers did not portray a significantly higher willingness to pay for conspicuous products in conditions of high economic inequality in comparison to conditions of low economic inequality. Only a main effect of the type of product was found. Showing, as expected, that consumers are willing to pay significantly more for conspicuous products in comparison to non-conspicuous products. Still, how is it possible that, even though most literature points towards the hypothesized situation, willingness to pay for conspicuous products is not significantly influenced by the level of economic inequality? This chapter will focus on some possible explanations for the insignificant results (5.1) and will talk about the theoretical contributions & practical implications (5.2).

5.1 Possible Explanations

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final decision. Because of this, it is wise for future research to measure liking for the brand and control for this variable by means of an ANCOVA.

Another possible explanation might be a change in the mindset of consumers on excessive spending, between the time in which most of the papers this research was based on were conducted, and now. Most of the papers discussing the motives for conspicuous consumption and finding that people engage in conspicuous consumption, even if they cannot afford such consumption, thus racking up enormous levels of debt, were written around 2006 until 2009. A time in which the total consumer debt in the US was at its peak. A time right before the financial crisis (Davidson, 2017). Before the financial crisis consumers did not understand/care about the consequences of a huge debt and were actually motivated by both companies and banks to take a loan, resulting in many consumers getting enormous loans. However, the financial crisis caused consumers to understand the consequences of huge debts and the total consumer debt decreased. As we speak, the total consumer debt is at a peak again. However, this time the loans are mostly for necessities, not for conspicuous items (Wack, 2018). It might thus very well be that high economic inequality still increases the desire for conspicuous products, but consumers now are wise enough to not spend money they do not have on such consumption and thus keep their own financial situation in mind when indicating their willingness to pay. It might therefore have been wise to not measure the willingness to pay for such a product in monetary terms, but to measure the desire a person has for such a product in the four different conditions that were created. That way participants did not have to take their financial situation into account, but simply indicated the desire for the product.

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A final reason might be that there is a mediating variable in place that was not measured. It can very well be that, even though the direct path between the level of economic inequality and the willingness to pay for conspicuous products is not significant, there is a significant indirect effect via some mediator (Hayes, 2009). One of the mediating variables might be threat to the self. Sivanathan & Pettit (2010) found that consumers engage in conspicuous consumption after experiencing a threat to the self in order to repair their ego. It might very well be that consumers feel threatened when hearing they are living under conditions of high economic inequality and in turn thus engage in conspicuous consumption. There might be a significant effect of the level of economic inequality on the threat to the self, which in turn causes a significant effect on the willingness to pay for conspicuous products. All while the direct path between the level of economic inequality and the willingness to pay for conspicuous products remains insignificant. There might be other mediating variables as well, the only way to find out is by testing them in future research.

Logically, there might be many other possible explanations. However, the above-mentioned explanations relate strongly to this particular research, are concrete and can be tested in future research.

5.2 Theoretical Contributions & Practical Implications

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This research also has important practical implications that cannot be overlooked. The findings of this research allow both marketers and other business focussed professionals to better understand the behavior of the consumer and therefore allow them to make better informed decision. It, once again, proves that marketer can indeed charge more for conspicuous products. However, more importantly, it also shows that the level of economic inequality does not affect the business in terms of both conspicuous and non-conspicuous product sales. There is no use for the marketers to increase their prices in times of high economic inequality or make the level of economic inequality in their commercials more salient, since it will have no effect on the consumer and will not result in a consumer willing to pay more.

6. Conclusion

Due to the increasing gap between the rich and the poor, in terms of both pay, income and wealth, and the negative consequences that come along with this trend, the research on economic inequality and the interest in the concept of economic inequality has grown significantly over the last couple of years. The aim of this research was to contribute to that existing body of literature, by exploring another negative consequence possibly caused by high economic inequality. Namely, conspicuous consumption. A type of behavior that seemed to tick all the boxes for being caused by high economic inequality. Therefore, the question this research aimed to find out was: Does economic inequality influence consumers’ desire for conspicuous consumption?

The quick answer, according to the findings of this research, is ‘no’. Economic inequality does not influence consumers’ desire for conspicuous products. More specifically, the findings of this research indicate that the willingness to pay for a type of product is not dependent on the level of economic inequality. Consumers are, thus, not willing to pay significantly more for conspicuous products under conditions of high economic inequality in comparison to conditions of low economic inequality. The research does, however, back-up a very well-known notion. Namely, that consumers are indeed willing to pay significantly more for conspicuous products in comparison to non-conspicuous products.

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another self-defeating decision in terms of money and that high economic inequality is not a driver of conspicuous consumption. Furthermore, it helps marketers to make better informed decision regarding consumer behavior towards both conspicuous and non-conspicuous products in times of both high and low economic inequality.

The research has some limitation (i.e.: which will be discussed in chapter 7) and there are some possible explanations for why the results were found to be not significant (i.e.: as were discussed in chapter 5.1). These limitation and possible explanations pave the way for future research in this field and pose some interesting questions to conclude with, namely; (1) Was the research conducted properly or will the findings be different when certain limitations are taken care of? (2) Should desire for the product be measured in another way, since consumers might now be wise enough to consider their own financial situation? (3) Even though, there is no direct relationship. Is there an indirect relationship, with for example threat to the self being a mediator?

7. Limitations

In addition to the possible explanations that were discussed in the discussion chapter of this research, this chapter will focus on some general limitations that possibly affected the findings of the research. Based on both the possible explanations and the general limitations future research, future research recommendations will be given in chapter 8.

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Another limitation is related to the manipulation of the type of product. Even though the manipulation is successful, and the manipulation has been used by Sivanathan & Pettit (2010) and Rucker & Galinsky (2008), It is difficult to present consumers with a product that can be both conspicuous and non-conspicuous, is desirable for every consumer and at the same time does not pose any confounds. It might very well have been that certain participants do like not sweaters or did not like this model sweater in particular and therefore their willingness to pay was influenced. There is, however, not yet a manipulation available for manipulating the type of product (conspicuous vs. non-conspicuous) that seems more trustworthy and has been used more than the manipulation used in this particular research.

The all-American sample might be a limitation to this study as well. Due to time and resource constraints the decision was made to gather data from an all-American sample. The results were found not significant for this sample. Many demographic variables were measured and accounted for by means of the ANCOVA analysis. Still, the sample was, as stated above, all-American. Meaning that the researcher could not account for the effects of nationality. It might thus very well be that the findings are completely different for a sample of another nationality or even a sample of mixed nationalities.

8. Future Research Recommendations

In this chapter future research recommendations will be given. These recommendations will be given based on the potential explanations for the insignificant results (i.e.: which were discussed in chapter 5.1) and based on the limitations of this research (i.e.: which were discussed in chapter 7). This will pave the way for future research to conduct the same research or a research in line with this one, while avoiding the limitations this research was subjected to.

First of all, future research using the type of product manipulation that was used in this research, should measure liking for the brand. This variable might have influenced the findings of this research, since liking for the brand logically influences willingness to pay. When measuring liking for the brand, the effect of this variable can be controlled for by means of an ANCOVA analysis.

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willingness to pay as a dependent variable and measure. If it is truly so that the mindset of consumers has changed regarding conspicuous consumption on a loan, it is wise to measure the desire for conspicuous consumption in another way, in order to make sure that people do not account for their own financial situation in their decision. If future research does, however, choose to use willingness to pay as a dependent variable and measure, it would be wise to make use of a revealed measure of willingness to pay. The stated measure that was used in this particular research is subjected to some level of hypothetical bias, this would not be the case for a revealed measure.

Third of all, future research should consider the effect of a possible mediator in the relationship between the level of economic inequality and the willingness to pay for conspicuous and non-conspicuous products. Hayes (2009) suggests that, even though there is no direct relationship between two constructs, there might still be an indirect relationship via some mediator. A possible mediator that deems further exploration is threat to the self. Prior research by Sivanathan & Pettit (2010) found that consumers engage in conspicuous consumption after experiencing a threat to the self. It might very well be that hearing you are living under conditions of high economic inequality might be felt as a threat to the self. Because of this, threat to the self might be a logical mediator.

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Appendixes

Appendix 1: Cleaning of the Dataset

Number of deleted participants Reason for deleting participant(s) Additional Information

3 participants Didn’t understand presented info.

These participants indicated that they did not understand the information provided to them about the inequality in their state.

8 participants Answered inequality attention check wrong.

These participants presented wrong percentages of private wealth per fifth of the population in the inequality attention check question.

29 participants Answered the end attention check wrong.

These participants answered ‘beautiful’ instead of ‘ugly’ to the final attention check question, indicating they did not read the instructions carefully.

1 participant Left the computer after the

manipulation.

This participant left the computer after the manipulation of economic inequality, posing the risk of an unsuccessful manipulation.

7 participants Used wrong device.

These participants used their phone to complete the survey, making the interpretation of the graphs too difficult for manipulation.

12 participants Participated in a similar study.

These participants indicated they participated in a similar study and might therefore already know the manipulation, making it less or unsuccessful. 1 participant WTP was not

recorded *bug*.

For this participant the WTP was not recorded, most likely due to a bug in Qualtrics.

2 participants Were outliers in WTP

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Appendix 2: Manipulation of Economic Inequality

High economic inequality condition

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Appendix 3: Manipulation of Type of Product

Conspicuous product condition

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Appendix 4: Experimental Survey

reCaptcha (Block 1)

Please complete the following captcha in order to proceed with the study.

Introduction (Block 2)

Dear Participant,

Welcome to our survey and thank you very much for participating! The purpose of this survey is twofold. First of all, in the first part of the survey, we are exploring individuals' opinions regarding wealth distribution in their states of residence. While in the second part of the survey we are interested in how much people are willing to pay for all sorts of different products.

Please be assured that all information provided by you as a participant will only be used for academic research purposes, will be handled with great discretion & confidentiality and all information will be kept anonymous. Participants are not identified in this study and

participation is voluntary. Please note that you are not allowed to participate in this survey if you are under the age of 18. After completing the survey you will be provided with a unique code which allows you to get paid.

Completing the survey will take around 7 minutes.

Please indicate below whether you want to participate in this research. If so, please do not leave your computer until the survey is completed. Thank you very much once again!

Would you like to participate in this survey? - Yes

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Inequality Manipulation (Block 3)

Welcome to the first part of the study. In this part you'll be presented with information about the wealth distribution of your home state. To provide accurate information on the wealth distribution of your home state, you will be asked a series of demographic questions. Based on your answers, data will be gathered from the US Census Bureau database on the wealth distribution in your home state in 2018. Depending on the current database activities the process may take several seconds.

- Page break –

What is your gender?

- Male - Female - Other: … - Prefer not to say

What is your age?

…

With what ethnicity do you identify most?

- Caucasian

- Hispanic / Latino

- African / African American

- Native American / American Indian - Asian / Pacific Islander

- Other: …

What was your personal net gross annual income for 2018? In dollars without decimals. (The money you received yourself from all sources)

…

What was your household net gross annual income for 2018? In dollars without decimals. (The money received by all household members, including yourself)

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How many members are there in your household?

…

- Page break –

Which statement best describes your current employment status?

- Employed for wages - Self-employed

- Out of work and looking for work

- Out of work and currently not looking for work - A homemaker - A student - Military - Retired - Unable to work - Other: …

What is your current marital status?

- Single, never married

- Married or domestic partnership - Widowed

- Divorced - Seperated - Other: …

What is your highest educational achievement?

- No schooling completed - Nursery school to 8th grade - Some high school, no diploma

- High school graduate, diploma or the equivalent - Some college credit, no degree

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- Master’s degree - Professional degree - Doctorate degree - Other: …

- Page break -

How conservative or liberal are you on most political and social issues?

Very conservative (1.) / (2.) / (3.) / Neither conservative not liberal (4.) / (5.) / (6.) / Very liberal (7.)

To which social class do you feel you belong?

- The upper class

- The upper middle class - The lower middle class - The working class - The lower class

Please indicate how religious you are on the following scale.

Not religious at all (1.) / (2.) / (3.) / (4.) / (5.) / (6.) / Very religious (7.)

- Page break -

What is your state of residence?

Dropdown-menu of the 50 US states

Retrieving Information (Block 4)

Please wait while we retrieve your information from the US Census Bureau for 2018:

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Timer (7 seconds)

Economic Inequality Manipulation (Block 5 – High Economic Inequality Condition)

In the pie-chart below you see how wealth is distributed in the state of ${q://QID17/Choice

Group/SelectedChoices}. These results are constructed based on combined data from our own

large database and data from the US Census Bureau for 2018.

The distribution of wealth in your home state is very unequal, meaning that there is high

economic inequality.

Do you understand the information you are provided with above?

- Yes - No

Please indicate the percentages of private wealth owned by the different fifths as displayed in the graph.

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Please indicate how high you feel the level of economic inequality is in your home state based on the information you were just provided with.

Very low economic inequality (1.) / (2.) / (3.) / (4.) / (5.) / (6.) / Very high economic inequality (7.)

Economic Inequality Manipulation (Block 5 – Low Economic Inequality Condition)

In the pie-chart below you see how wealth is distributed in the state of ${q://QID17/Choice

Group/SelectedChoices}. These results are constructed based on combined data from our own

large database and data from the US Census Bureau for 2018.

The distribution of wealth in your home state is very equal, meaning that there is low

economic inequality.

Do you understand the information you are provided with above?

- Yes - No

Please indicate the percentages of private wealth owned by the different fifths as displayed in the graph.

Wealthiest fifth of the population owns ...% of private wealth Middle fifth of the population owns ...% of private wealth Poorest fifth of the population owns ...% of private wealth

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Very low economic inequality (1.) / (2.) / (3.) / (4.) / (5.) / (6.) / Very high economic inequality (7.)

Type of Product Manipulation & Willingness to Pay Measure (Block 6)

Thank you very much for answering the questions for the first part of the survey. Welcome to the second part of the survey. In the second part of the survey we are interested in how much people are willing to pay for all sorts of different products. On the next page you are

presented with a product and are asked a couple of questions regarding that product.

Type of Product Manipulation & Willingness to Pay Measure (Block 7 – Conspicuous Product Condition)

Below you see a popular limited edition grey unisex sweater by the expensive fashion brand Gucci.

Please indicate the highest price you would be willing to pay for this product, given you put your own fashion taste aside (in dollars without decimals).

…

- Page break -

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What is conspicuous?

A conspicuous product generally said is a product that features high symbolic value, limited reproducibility, high price and overall quality over quantity. Furthermore, the higher the visibility of a good, the more likely it is to be a conspicuous product. For example, luxury cars, fancy clothing and jewellery. Overall, we can state that conspicuous products are products that signal a high level of status due to their unique presence and position in the social hierarchy.

How conspicuous do you rate the product you are presented with?

Very non-conspicuous (1.) / (2.) / (3.) / (4.) / (5.) / (6.) / Very conspicuous (7.)

Type of Product Manipulation & Willingness to Pay Measure (Block 7 – Non-Conspicuous Product Condition)

Below you see a common unisex sweater by the brand H&M.

Please indicate the highest price you would be willing to pay for this product, given you put your own fashion taste aside (in dollars without decimals).

…

- Page break -

Please indicate for the product you are presented with how conspicuous you would rate that product on a scale from 1 (very non-conspicuous) to 7 (very conspicuous).

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What is conspicuous?

A conspicuous product generally said is a product that features high symbolic value, limited reproducibility, high price and overall quality over quantity. Furthermore, the higher the visibility of a good, the more likely it is to be a conspicuous product. For example, luxury cars, fancy clothing and jewellery. Overall, we can state that conspicuous products are products that signal a high level of status due to their unique presence and position in the social hierarchy.

How conspicuous do you rate the product you are presented with?

Very non-conspicuous (1.) / (2.) / (3.) / (4.) / (5.) / (6.) / Very conspicuous (7.)

Closing Questions (Block 8)

You are almost at the end of the survey, we have a few more closing questions.

Below you will find a statement regarding the beauty of clothing and how likely you are to buy either beautiful or ugly clothing. In order to check whether you are paying attention and reading the information provided please answer ‘ugly’ to the statement below.

I am more likely to spend my money on …. clothing. - Ugly

- Beautiful

- Page break -

How attentive were you during the completion of the survey?

Not attentive at all (1.) / (2.) / (3.) / (4.) / (5.) / (6.) / Very attentive (7.)

By any chance, did you leave your computer during the completion of the survey? If so, where in the survey?

- No, I did not leave my computer during the completion of the survey - Yes, after the introduction

- Yes, after answering the demographic questions

The impact of economic inequality on consumers’ desire for conspicuous consumption