Willingness to Pay for Status Signals in Online Luxury Markets

39 Pages Posted: 11 Mar 2020

See all articles by Yue Yuan

Yue Yuan

Lehigh University - Department of Economics

Yuliang Oliver Yao

Lehigh University

Marybeth Deily

Lehigh University - Department of Economics

Date Written: February 6, 2020

Abstract

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

Suggested Citation

Yuan, Yue and Yao, Yuliang and Deily, Marybeth, Willingness to Pay for Status Signals in Online Luxury Markets (February 6, 2020). Available at SSRN: https://ssrn.com/abstract=3533481 or http://dx.doi.org/10.2139/ssrn.3533481

Yue Yuan (Contact Author)

Lehigh University - Department of Economics ( email )

620 Taylor Street
Bethlehem, PA 18015
United States

Yuliang Yao

Lehigh University ( email )

621 Taylor Street
Bethlehem, PA 18015
United States

Marybeth Deily

Lehigh University - Department of Economics ( email )

620 Taylor Street
Bethlehem, PA 18015
United States
610-758-4951 (Phone)
610-758-4677 (Fax)

HOME PAGE: http://www.lehigh.edu/~incbeug/faculty/marybethdeily.html

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