Inconspicuous Conspicuous Consumption

Juan Carlos Carbajal, Jonathan Hall and Hongyi Li
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Juan Carlos Carbajal: University of New South Wales
Jonathan Hall: Analysis Group
Hongyi Li: University of New South Wales

No 38, Working Papers from Peruvian Economic Association

Abstract: A puzzling feature of conspicuous consumption, given its role in signaling wealth, is that it is not more conspicuous. For example, luxury handbags are often available in multiple variants that differ in logo visibility; in fact, subtly branded handbags are often more expensive than their loudly branded equivalents. Why may consumers prefer to deliberately obfuscate their conspicuous consumption? Our explanation is that by being imperfectly visible, subtly conspicuous consumption signals social connectedness in addition to wealth. We analyze a model where individuals care about their reputation for both wealth and social connectedness. Wealthy but poorly-connected individuals consume loudly conspicuous goods because subtle consumption is too costly in foregone wealth signaling. Wealthy, well-connected individuals consume subtly to distinguish themselves from poorly-connected individuals. The model thus explains why "old-money" types prefer to consume subtly, whereas "nouveau riche" types tend to consume loudly. Further, the model predicts that more subtle consumption takes place in societies where social capital is more important. It also explains recent empirical findings from the marketing literature that subtly-branded luxury goods tend to be more expensive than their loudly-branded equivalents.

Keywords: conspicuous consumption; signaling; Veblen goods (search for similar items in EconPapers)
JEL-codes: D11 D43 (search for similar items in EconPapers)
Date: 2015-04
New Economics Papers: this item is included in nep-pke
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Citations: View citations in EconPapers (4)

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