In 1899, Thorstein Veblen introduced his theory of “conspicuous consumption,” observing that people spent money to impress others. If pop lyrics are any indication, they still do. See Lorde’s song “Royals,” which notes the popularity of fancy champagne, luxury cars, and jeweled watches: “Everybody’s like, ‘Cristal, Maybach, diamonds on your timepiece.’ ”
What explains the enduring appeal of luxury goods? For one thing, they command deference. Dutch researchers reported in 2011 that people are more compliant toward someone wearing a respected brand’s logo, donating greater amounts to a charity when solicited by that person and offering more money to that person in an economics game [1]. According to a study published this year, those who believe society should be stratified by status are more likely to see the appeal of prestigious brands. The study’s authors also found that students in China like status brands more than American ones do, a difference they linked to greater respect for social hierarchy among the Chinese students. The strong Chinese market for luxury products, they suggest, may result from more than prosperity [2].
A study by a pair of business-school professors found that when subjects were made to feel a lack of social power, they were willing to pay more for high-status goods, presumably to compensate for lower status [3]. Perhaps this is why blacks and Hispanics—groups that have historically had lower social status than whites—spend more on clothing, jewelry, and cars than do whites of comparable income [4].