Willingness to Pay for Status Signals in Online Luxury Markets
39 Pages Posted: 11 Mar 2020
Date Written: February 6, 2020
We study consumers’ valuation of status signals by estimating consumers’ willingness to pay for a luxury item with a quiet vs. a prominent logo. We collected data from two online markets on sales of two luxury handbags that differ only in the prominence of their logo. We use these data to estimate the premium in consumers’ willingness to pay for the handbag with the quiet logo, as well as to test hypotheses as to how the condition of the handbag and the sales mode affects that premium. We find consumers are willing to pay a sizeable premium of $151-$189, or 15-20% of the retail price, for the quiet handbags as compared to the loud handbags. This price premium decreases as a handbag’s condition worsens, but is larger for quiet handbags purchased at a fixed price rather than at auction. Our findings provide empirical support for research suggesting that an elite set of consumers, i.e., consumers with more social capital or social connectedness, are willing to pay a premium for quiet luxury goods.
Keywords: Willingness to Pay; Luxury Marketing; Online Markets
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