The Need for Affiliation: Why Income Inequality Leads to Luxury Consumption

Conspicuous consumption—spending money on luxury goods and services to publicly display the economic power of the buyer—has historically been associated with people that have more disposable income. Recent literature suggests this may no longer be true. The phenomenon of “keeping up with the Joneses” is found across income classes, sometimes even more so in lower-income communities and households. Furthermore, income inequality in an area or region is often a strong predictor of that population’s tendency to engage in conspicuous consumption. Literature across disciplines (i.e., economic theory, social psychology, cross-cultural psychology, and marketing) has explored the relationship between income inequality and conspicuous consumption. The goal of this dissertation is to explore the role of both social and psychological motives in consumer decision making to understand how income inequality impacts luxury consumption. Previous literature has explored the impact of income inequality on conspicuous consumption. In this research, I examine the role of self-reported socioeconomic status and how it relates to conspicuous consumption. Furthermore, I explore the role of need for affiliation, and it’s impact conspicuous consumption behaviours—how aspirational consumers are driven to spend more as a function of their desire to fit in with wealthier consumers. While previous literature examines conspicuous consumption in emerging economies, here I explore the cultural and individual differences underlying these prior findings. Lastly, I explore sex differences in conspicuous consumption across cultures, and hypothesize that while conspicuous consumption increases in emerging markets, sex differences should not change. The findings suggest the opposite of what I hypothesized: socioeconomic status increases the tendency to use conspicuous consumption. However, this is mediated by the need for affiliation which also increases with higher socioeconomic status. Finally, the data suggests that sex differences in conspicuous consumption are non-existent in emerging markets, a finding which opens a new avenue of research beyond the scope of the work already completed in this field