Empirical tests of status consumption: Evidence from women's cosmetics

Abstract

Nearly all applied work in consumer demand assumes that the preference functions of individuals are independent, thereby ruling out status consumption and other inter-personal comparison motivations. Surprisingly, the validity of the “independence” assumption has not been tested. However, it is feasible to conduct tests which differentiate between status-motivated demand and consumer demand in which no status motivations are present. This paper provides such a test, which is based on the fact status consumption ordinarily occurs only with publically visible products. We investigate brand buying patterns among four cosmetics product, and find, as hypothesized, that visible status goods have a lower price-quality correlation (i.e., a higher status premium) and that the pattern of brand buying favors higher-priced (i.e., status) brands. We also find, as expected, that income and occupational status are positively associated with the propensity to engage in status-purchasing, as are urban and suburban residence, and being a Caucasian. PsycINFO classification: 3900