Expected Socioeconomic-Status-Based Discrimination Reduces Price Sensitivity Among the Poor

Abstract

Low-socioeconomic-status (SES) consumers tend to be more price sensitive than their high-SES counterparts. Nonetheless, various economic-related burdens, such as mobility costs and lack of information, often hinder their ability to attend to scarcity—a phenomenon called “ghetto tax.” The current research moves a step further to show that even when very poor consumers can exert price sensitivity and are fully informed, a “psychological ghetto tax” often discourages them from doing so. Across five studies, the authors demonstrate that, relative to (1) high-SES consumers or (2) contexts of intragroup interaction, low-SES consumers are willing to pay higher prices and to accept lower-value rewards to avoid commercial settings that require intergroup interaction (e.g., poor consumers in a high-end shopping mall). This effect is driven by the poor consumers’ heightened expectations of discrimination in upscale commercial settings, a concern virtually nonexistent among wealthy consumers. Companies’ inclusion statements emphasizing customer equality and/or customer diversity can serve as safety cues against stigmatized identities and increase low-SES consumers’ price sensitivity.