The seller's status‐signaling fallacy

Abstract

AbstractThe present research introduces the seller's status‐signaling fallacy: Sellers tend to use status signals to attract buyers, but buyers actually prefer sellers who do not signal status. Across six studies we demonstrate the effect using different operationalizations of status and various products for sale. Study 1 demonstrates this effect in contexts where sellers and buyers make initial sales connections. Study 2 replicates the effect in transaction situations where the buyer actually chooses the seller from whom to buy. Studies 3a and 3b reveal a novel mediation model according to which the seller's status signaling is perceived by buyers as an unsuccessful impression management attempt, which ultimately leads those buyers to prefer sellers who do not try to impress them through status signaling. Finally, studies 4a and 4b demonstrate the robustness of the effect in an incentivized setting and explore boundary conditions. This work enriches the growing literature on status signals in two ways. First, it shows that sellers mistakenly believe that such signaling is beneficial for them. Second, contrary to accepted wisdom, it shows that such signaling repels buyers. In the gig‐economy era, where everyone can become a seller in the marketplace, these findings are highly applicable.