Analysis of Luxury Consumption in Economic Downturn Based on Alternative Theory

Yanyan Yin, Xuan Yang, Keke Wang and Jiaojiao Tian

Chapter 5 in Internet Finance and Digital Economy:Advances in Digital Economy and Data Analysis Technology, 2023, pp 55-64 from World Scientific Publishing Co. Pte. Ltd.

Abstract: In the downward phase of the economic cycle, there is an abnormal phenomenon that the sales of luxury goods increase instead of decrease, which is generally believed to be caused by the influence strategy of luxury goods. However, this view—luxury sales are less affected by the economic cycle and should maintain a slow growth trend year by year, cannot explain the reason why luxury sales show a significant growth trend in the downward phase of the economic cycle. In order to explain this phenomenon, this paper puts forward the alternative theory, which believes that people’s consumption behavior is inevitable, but there can be differences in consumer goods. When they are able to consume A or B, they choose consumption B instead of consumption A for various reasons. It can be considered that the alternative theory has played an important role. The growth rate of luxury consumption in China from 2011 to 2019 is proposed and combined by the least square method to obtain the theoretical growth rate in 2020 and 2021. The comparison shows that the theoretical growth rates in 2020 and 2021 are significantly higher than the real growth rates. Finally, using the alternative theory, this paper expounds on the reasons for the increase of luxury consumption in the downward stage of the economic cycle from the aspects of psychological needs, consumption motivation, and the impact of COVID-19.

Keywords: Internet Economy; Online Finance; Financial Engineering; Big Data; Blockchain; Supply Chain; E-commerce (search for similar items in EconPapers)
JEL-codes: G2 O33 (search for similar items in EconPapers)
Date: 2023
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