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Inconspicuous Conspicuous Consumption

Author

Listed:
  • Juan Carlos Carbajal

    (University of New South Wales)

  • Jonathan Hall

    (Analysis Group)

  • Hongyi Li

    (University of New South Wales)

Abstract

A puzzling feature of conspicuous consumption, given its role in signaling wealth, is that it is not more conspicuous. For example, luxury handbags are often available in multiple variants that differ in logo visibility; in fact, subtly branded handbags are often more expensive than their loudly branded equivalents. Why may consumers prefer to deliberately obfuscate their conspicuous consumption? Our explanation is that by being imperfectly visible, subtly conspicuous consumption signals social connectedness in addition to wealth. We analyze a model where individuals care about their reputation for both wealth and social connectedness. Wealthy but poorly-connected individuals consume loudly conspicuous goods because subtle consumption is too costly in foregone wealth signaling. Wealthy, well-connected individuals consume subtly to distinguish themselves from poorly-connected individuals. The model thus explains why "old-money" types prefer to consume subtly, whereas "nouveau riche" types tend to consume loudly. Further, the model predicts that more subtle consumption takes place in societies where social capital is more important. It also explains recent empirical findings from the marketing literature that subtly-branded luxury goods tend to be more expensive than their loudly-branded equivalents.

Suggested Citation

  • Juan Carlos Carbajal & Jonathan Hall & Hongyi Li, 2015. "Inconspicuous Conspicuous Consumption," Working Papers 38, Peruvian Economic Association.
  • Handle: RePEc:apc:wpaper:2015-038
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    References listed on IDEAS

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    1. Pesendorfer, Wolfgang, 1995. "Design Innovation and Fashion Cycles," American Economic Review, American Economic Association, vol. 85(4), pages 771-792, September.
    2. Kerwin Kofi Charles & Erik Hurst & Nikolai Roussanov, 2009. "Conspicuous Consumption and Race," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(2), pages 425-467.
    3. Nick Feltovich & Richmond Harbaugh & Ted To, 2002. "Too Cool for School? Signalling and Countersignalling," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 630-649, Winter.
    4. Jonah Berger & Morgan Ward, 2010. "Subtle Signals of Inconspicuous Consumption," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 37(4), pages 555-569, December.
    5. Bagwell, Laurie Simon & Bernheim, B Douglas, 1996. "Veblen Effects in a Theory of Conspicuous Consumption," American Economic Review, American Economic Association, vol. 86(3), pages 349-373, June.
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    Cited by:

    1. Lu, Siting, 2020. "Status Signalling with Luxury and Cultural Goods," MPRA Paper 102545, University Library of Munich, Germany.
    2. Clark, Beth & Stewart, Gavin B. & Panzone, Luca A. & Kyriazakis, Ilias & Frewer, Lynn J., 2017. "Citizens, consumers and farm animal welfare: A meta-analysis of willingness-to-pay studies," Food Policy, Elsevier, vol. 68(C), pages 112-127.
    3. Friedrichsen, Jana, 2018. "Signals Sell: Product Lines when Consumers Differ Both in Taste for Quality and Image Concern," Rationality and Competition Discussion Paper Series 70, CRC TRR 190 Rationality and Competition.
    4. Harbaugh, Richmond & To, Theodore, 2020. "False modesty: When disclosing good news looks bad," Journal of Mathematical Economics, Elsevier, vol. 87(C), pages 43-55.

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    More about this item

    Keywords

    conspicuous consumption; signaling; Veblen goods;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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