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Status Goods: Experimental Evidence from Platinum Credit Cards

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  • Gautam Rao
  • Leonardo Bursztyn
  • Stefano Fiorin
  • Bruno Ferman
  • Martin Kanz

Abstract

Economists have long hypothesized that social status considerations are a powerful driver of consumption choices (Veblen 1899). But empirically identifying status goods is difficult, since status components of consumption are confounded by unobserved instrumental utility. We work with a large bank in Indonesia to market their widely-recognized platinum credit cards, typically restricted to high-income customers, to a marginally eligible population of customers. In a control group, customers are offered all the financial services and benefits of the platinum card, but as an included upgrade on their existing nondescript credit card. In two treatment groups, customers are instead offered the platinum card itself. We find that demand for the platinum card is substantially higher than demand for the instrumental benefits, providing evidence of the importance of image considerations. We provide evidence that the demand for the platinum card appears to be driven substantially by social image concerns, rather than self image or identity. We find that it is the less-rich (middle-class) individuals in the sample who show a demand for the social image aspect of the platinum card, rather than the very rich. An analysis of the utilization of the credit cards reveals that platinum card holders are causally more likely to use the card in social situations such as restaurants, bars and clubs, where the card may be visible to others. In contrast, there are no effects on more private uses of the card, such as online purchases. Finally, we provide evidence of "fashion cycles" in the marketing of elite credit cards, consistent with models of status goods (Pesendorfer 1995).

Suggested Citation

  • Gautam Rao & Leonardo Bursztyn & Stefano Fiorin & Bruno Ferman & Martin Kanz, 2016. "Status Goods: Experimental Evidence from Platinum Credit Cards," Working Paper 396916, Harvard University OpenScholar.
  • Handle: RePEc:qsh:wpaper:396916
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    Cited by:

    1. repec:red:issued:18-225 is not listed on IDEAS
    2. Bose, Neha & Sgroi, Daniel, 2019. "Theory of Mind and Strategic Decision-Making," CAGE Online Working Paper Series 409, Competitive Advantage in the Global Economy (CAGE).
    3. Bonan, Jacopo & Battiston, Pietro & Bleck, Jaimie & LeMay-Boucher, Philippe & Pareglio, Stefano & Sarr, Bassirou & Tavoni, Massimo, 2017. "Social Interaction and Technology Adoption: Experimental Evidence from Improved Cookstoves in Mali," MITP: Mitigation, Innovation and Transformation Pathways 263486, Fondazione Eni Enrico Mattei (FEEM).
    4. Alain Cohn & Tobias Gesche & Michel André Maréchal, 2018. "Honesty in the Digital Age," CESifo Working Paper Series 6996, CESifo Group Munich.
    5. Aronsson, Thomas & Johansson-Stenman, Olof & Wendner, Ronald, 2019. "Charity, Status, and Optimal Taxation: Welfarist and Paternalist Approaches," Umeå Economic Studies 959, Umeå University, Department of Economics.
    6. Drechsel-Grau, Moritz & Greimel, Fabian, 2018. "Falling Behind: Has Rising Inequality Fueled the American Debt Boom?," Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181585, Verein für Socialpolitik / German Economic Association.
    7. Sommarat Chantarat & Atchana Lamsam & Krislert Samphantharak & Bhumjai Tangsawasdirat, 2018. "Household Debt and Delinquency over the Life Cycle," PIER Discussion Papers 94, Puey Ungphakorn Institute for Economic Research, revised Sep 2018.
    8. repec:anr:reveco:v:9:y:2017:p:131-153 is not listed on IDEAS
    9. Nicolas L. Bottan & Ricardo Perez-Truglia, 2017. "Choosing Your Pond: Location Choices and Relative Income," NBER Working Papers 23615, National Bureau of Economic Research, Inc.
    10. George Deltas & Eleftherios Zacharias, 2018. "Product Proliferation and Pricing in a Market with Positional Effects," Working Papers 242312853, Lancaster University Management School, Economics Department.
    11. Bose, Neha & Sgroi, Daniel, 2019. "Theory of Mind and Strategic Decision-Making," The Warwick Economics Research Paper Series (TWERPS) 1191, University of Warwick, Department of Economics.
    12. Moritz Drechsel-Grau & Fabian Greimel, 2018. "Falling Behind: Has Rising Inequality Fueled the American Debt Boom?," 2018 Meeting Papers 1032, Society for Economic Dynamics.
    13. 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.
    14. Leonardo Bursztyn & Robert Jensen, 2017. "Social Image and Economic Behavior in the Field: Identifying, Understanding, and Shaping Social Pressure," Annual Review of Economics, Annual Reviews, vol. 9(1), pages 131-153, September.
    15. repec:eee:soceco:v:78:y:2019:i:c:p:193-199 is not listed on IDEAS

    More about this item

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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