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Joint Public Economics, Development & Behavioral Economics Workshop - Gautam Rao

Thu, 09/28/2017 - 11:40am

Gautam Rao

Harvard University

111 Ives Hall

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This paper provides novel field-experimental evidence on status goods. We work with an Indone-sian bank that markets platinum credit cards to high-income customers. In a first experiment, we show that demand for the platinum card greatly exceeds demand for a nondescript con-trol product with identical benefits, suggesting demand for the pure status aspect of the card. Transaction data reveal that platinum cards are more likely to be used in social contexts, im-plying social image motivations. Combining price variation with information on the use of the card sheds light on the magnitude of the demand for social status. In a second experiment, we provide evidence of positional externalities from the consumption of these status goods. The final experiment shows that increasing self-esteem causally reduces demand for status goods. We infer that part of the demand for status is psychological in nature, and that social image is a substitute for self image.

Event Categories: Behavioral Economics & BEDR