Modeling consumer preferences for status-signaling brands: branding, pricing, and product-line decisions
This dissertation introduces methods to quantitatively model the effects of human needs for social status on consumer behavior. More precisely, in this dissertation we: a) propose the first actionable metrics of the social status signaled by brands as functions of product line prices; b) use the new metrics and a new model of quality choice to show that both the ability and the motivation to pursue social status through consumption are affected by the economic resources available to consumers; c) identify the product line composition and pricing strategies that favor the sales of status-signaling products and brands under different levels of economic inequality among consumers. Important methodological and managerial contributions are drawn from the proposed metrics and models. For instance, the inclusion of the status metrics in the models allow the models to abstract rich substitution patterns. In terms of managerial implications, we find that including affordable products into a brand's product line may not harm the social status signaled by the brand as long as the median price of the line is relatively high and the most sold product is not very expensive. We also find that increasing consumer wealth inequality enhances the demand for low-end brands by increasing the dispersion of consumer preferences for status signaling and their saliency. High-end brands, in contrast to low-end brands, should adapt to increasing inequality by equalizing the social status of their product lines across product categories.