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
New York University (NYU) - Department of Marketing
March 10, 2014
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, M31working papers series
Date posted: August 18, 2013 ; Last revised: March 14, 2014
© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo3 in 0.453 seconds