Abstract

http://ssrn.com/abstract=2311322
 


 



Making Your Discretionary Money Last: Financial Constraints Increase Preference for Material Purchases by Focusing Consumers on Longevity


Stephanie M. Tully


New York University (NYU) - Leonard N. Stern School of Business

Hal E. Hershfield


University of California, Los Angeles (UCLA) - Marketing Area

Tom Meyvis


New York University (NYU) - Department of Marketing

March 10, 2014


Abstract:     
When spending discretionary money, one of the most basic trade-offs consumers must make is between spending on material versus experiential purchases, a trade-off with substantial consequences for well-being. We propose that feelings of financial constraint lead consumers to spend their discretionary money on material goods rather than experiences. Specifically, we propose that financially constrained consumers are particularly concerned about the lasting impact of their purchase, leading them to seek out purchases that physically persist over time.

Across six studies, we find that the consideration of financial constraints shifts consumers’ preferences toward more material (rather than experiential) purchases, and that this systematic shift is due to an increased concern about the longevity of the purchase. Moreover, this preference shift persists even when the material options are more frivolous than the experiential ones, indicating that the effect is not driven by an increased desire for sensible and justifiable purchases. However, the shift towards material purchases disappears when the material purchase is unusually short-lived, suggesting that longevity is the key driver in our proposed process.

Number of Pages in PDF File: 59

Keywords: financial decision making, material purchases, experiential purchases, financial constraints, long-term focus

JEL Classification: D12, D31, D91, M31

working papers series





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Date posted: August 18, 2013 ; Last revised: March 14, 2014

Suggested Citation

Tully, Stephanie M. and Hershfield, Hal E. and Meyvis, Tom, Making Your Discretionary Money Last: Financial Constraints Increase Preference for Material Purchases by Focusing Consumers on Longevity (March 10, 2014). Available at SSRN: http://ssrn.com/abstract=2311322 or http://dx.doi.org/10.2139/ssrn.2311322

Contact Information

Stephanie M. Tully (Contact Author)
New York University (NYU) - Leonard N. Stern School of Business ( email )
40 West 4th Street
New York, NY NY 10012
United States
Hal E. Hershfield
University of California, Los Angeles (UCLA) - Marketing Area ( email )
110 Westwood Plaza
Los Angeles, CA 90095-1481
United States
Tom Meyvis
New York University (NYU) - Department of Marketing ( email )
Henry Kaufman Ctr
44 W 4 St.
New York, NY
United States
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