Buying Status: ~

Experimental Evidence on Status in Negotiation Sheryl B. Ball and Catherine C. Eckel Virginia Polytechnic Institute and State University

ABSTRACT

Status is an important motivator of human behavior. This article examines the extent to which people are willing to adjust their negotiating behavior in response to their opponent’s status level. The results of a series of experiments on the effect of status on student subjects’ negotiating behavior are reported. The data suggest that status affects human interactions in a positive way, which causes people to seek status. It is, therefore, a successful advertising strategy to associate high status with consumption of a product. 0 1996 John Wiley & Sons, Inc.

The pursuit of status is an important component of economic decision making. Status is defined as high rank on some dimension that is held by society to be important. The sources of status can be separated into two main categories: those that are earned and those that are un- earned (acknowledging, of course, that status sometimes results from sources that are partly earned and partly unearned). For example, col- lege graduates hold earned status relative to high school dropouts, whereas hereditary rank represents an example of unearned status. Although status is an inherently social phenomenon, it has significant economic ramifications. Ball and Eckel (1994) explore the economic basis for the value of status by creating status in an experi- mental environment. They show that status affects the behavior of subjects: High-status individuals are treated favorably relative to low-

Psychology & Marketing 0 1996 John Wiley & Sons, Inc.

Vol. 13(4):381-405 (July 1996) CCC 0742-6046/96/040379-25

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status individuals. The current work explores this result and the light it sheds on consumers’ concern with status in their decisions to pur- chase goods and services. It concludes that buying status is rational, because high status favorably affects one’s outcome in economic situa- tions.

Background The quest for status is strong motivation for human behavior (Frank, 1985). The desire to win the status contest, and the value people place on status can explain many otherwise puzzling economic phenomena. For example, employees may sacrifice earnings for status: They are willing to trade absolute earnings for relative earnings because, within their own workplace, it is relative earnings that confer status. Frank presents evidence that earnings are much less extreme than marginal productivity differences (Chapter 4); he posits that people are willing to forego as much as 50% of income for rank. Scitovsky’s re- search (1976) earlier discounted the importance of absolute earnings in his analysis of why the American population’s rising absolute real earnings did not bring with it an increase in happiness. Because sta- tus has a strong effect on labor markets, it is likely to affect other product markets as well.

Frank noted in 1985, “[Ilt is perhaps an understatement to say that the economics profession as a whole has shown little interest in the idea that people are deeply concerned about their relative standing in hierarchies” (p. 37). This pattern seems to have reversed itself in the past several years. There is now a growing body of theory that exam- ines the possible trade-offs between status, earnings, and economic ef- ficiency. Robson (1992) investigates the implications for risk-taking behavior if individuals care about their own wealth and about the sta- tus induced by having high wealth relative to the rest of the popula- tion. Ng and Wang (1993) explore the welfare-reducing potential of the rat-race pursuit of relative income. Fershtman and Weiss (1993) con- struct a general equilibrium model where status and wages are en- dogenously determined. Congleton (1989) models status seeking as a game where one player’s success in achieving status reduces other players’ returns from status and shows that the quest for status can lead to economic inefficiency.

Economists have not examined status in product markets, a t least not recently. Veblen (1899) coined the term conspicuous consumption to describe the ostentatious acquisition he observed. Although present- day economists commonly ignore the effects of social factors in shaping economic behavior, Scitovsky (1945) hypothesized that the social value of a good is an attribute of product quality. He argued that price alone can give social value to a good, and if a high price was necessary to generate the social value that this was analogous to increasing the

382 BALL AND ECKEL

cost of any good by adding a desired feature. Classical demand theory assumes that the behavior of one person is independent of any other and as such cannot incorporate a study of Veblen effects. Liebenstein (1950) showed that this assumption could be relaxed so that demand could be divided into two categories: functional demand, which is mo- tivated by (physical) product attributes, and nonfunctional demand, which is motivated by factors other than product attributes. Among the elements of nonfunctional demand is demand induced by external effects, such as status. More recently, Becker (1991) and, in a formal model, Karni and Levin (1994) have examined popularity, a kind of status characteristic. Becker argues that popularity can give demand an odd shape, with the possibility of upward-sloping regions. Karni and Levin study equilibrium in markets where consumption can have a social aspect, a special form of a consumption externality. Popularity is easily reinterpreted as status in their formulation of the problem.

Although largely neglected by economists, purchasing decisions related to status have been extensively discussed in the marketing literature. LaBarbera (1988), for example, surveys writings on the nouveau riches, people who have recently acquired wealth and often engage in conspicuous consumption in an attempt to establish their status. Their behavior is chronicled on the television show “Lifestyles of the Rich and Famous,” hosted by Robin Leach. This consumption style is motivated by a desire to advertise their newfound money and achieve social acceptance by members of the traditional upper class. Less wealthy individuals also engage in conspicuous consumption; budget constraints, however, makes their behavior less worthy of tele- vision coverage. The social psychology literature suggests the impor- tance of status in its discussion of behavior both between and within groups of people. The discussion begins with the literature on be- tween-group effects.

An individual often acts differently toward individuals in the group he or she belongs to, the in group, than he or she does toward individ- uals in other groups, the out group, particularly when the status of the groups differs. Turner (1978) says that this is because people attach a positive value to being able to differentiate themselves from others, es- pecially in a positive light. Turner and Brown (1978) argue that con- ferring status on a group legitimizes its members’ superiority and makes them feel that they deserve, and thus should work to obtain, better outcomes for members of their own group.

An example of research in this area is Commins and Lockwood (1979). They ask subjects to divide 25 points (worth approximately a penny each) between an individual in their group and another individ- ual not in their group. The subject’s own earnings are unaffected by his decision. They study two variables that they feel are relevant in defining a group’s identity: status and favor. High-status groups were led to believe that they were better than low-status groups. High-favor

BUYING STATUS 383

groups were given an additional 25 points over lower-favor groups. Commins and Lockwood show that higher status increases the ten- dency to reward one’s one group, whereas increased favor reduces the tendency to reward one’s own group and that these are separable re- sults. The Hoffman and Spitzer (1985) results on bilateral bargaining (discussed below) are also consistent with the idea that status rein- forces the tendency to reward members of one’s own group.

Social interactions within a group are also affected by status. This research focuses on the status of individuals. (See, for example, Berger & Fisek, 1970; Berger, Rosenholtz, & Zelditch, 1980; Driskell & Mullen, 1990; Freese, 1974; and Hegtvedt, Thompson, & Cook, 1993.) Aperson’s status is assumed to provide information (which may or may not be accurate) about the individual to others and thus to condi- tion the behavior of others to the individual. As Freese (1974, pp. 174 and 175) argues, “[Tlhat stereotypes which collect about statuses may often be false when applied to a single individual is of less conse- quence than the fact that if people believe them to be true, they will respond to the person in predictable ways.’’

The just-world theory (see Lerner, 1970) offers one possible explana- tion for the observed deference to high-status groups and individuals. According to this theory, many people believe that in a just world, peo- ple get what they deserve and deserve what they get. This view of the world is believed to bias individuals positively toward persons of high status.

The just-world theory and the resulting deference to high-status in- dividuals may partially explain why people care about their relative payoffs. Studies by Bazerman, Lowenstein, and White (1992) and Lowenstein, Thompson, and Bazerman (1989) argue that individual utility functions include not only a term for own absolute payoffs but also terms for relative payoffs. The importance of relative payoffs may be partially explained by status. High-status individuals may expect higher payoffs while lower-status individuals may be more accepting of lower payoffs. Again, if subjects are willing to sacrifice absolute for relative earnings, they also are willing to purchase status outright in the form of a status good or status-development good.

Laboratory Economics Research on Bargaining

The experimental vehicle for this study is a simple economic environ- ment that is sensitive to noneconomic factors, but is designed so that indulging a preference for status is costly to the subject. There is an important reason why those concerned with marketing should study status in an economic environment. Although social psychologists have studied status in a wide range of environments, economic environ- ments constitute a subgroup of possible environments where the em- pirical relevance of status as a motivator for human behavior has not

~ ~

384 BALL AND ECKEL

yet been established. Ball and Eckel (1994) test whether status will retain its effect on behavior when money, another established motiva- tor, is at stake. These experiments are complementary to the work other researchers have conducted and extend the social scientist’s un- derstanding of status. Whether status still matters when money is at stake is a critical question underlying the use of status in marketing products and the topic of this research.

There is an important difference between the way experiments in economics and psychology are conducted. In the former, decisions are salient in money, making them economic decisions. Although psycholo- gists often pay their subjects, the payment typically does not depend on the decisions the subjects make. Economists motivate subjects with monetary payment, making the decisions as much like real-world eco- nomic decisions as possible. One of the contributions of this article is to point out that experimental results may change, depending on the monetary stakes. Social comparison may become less important as the stakes are increased.

In the ultimatum game, two players must divide a fixed sum of money. One player, called the proposer, proposes a division of the sum to the other. This second player, called the respondent, then either accepts or rejects the proposal. If the respondent rejects the offer then neither proposer nor respondent gets any money. As long as the proposer’s offer is positive, a respondent who cares only about his own monetary payoffs should accept the offer. Understanding the respondent’s motivation to be only his or her own monetary payoff, a proposer who cares only about his or her monetary payoff would offer the minimum possible positive sum of money. This pair of strategies-accept all positive offers for the respondent and make the lowest positive bid for the proposer-forms what economists call a (subgame perfect) equilibrium.

Experimental research in this environment has generally failed to find support for this equilibrium. Guth, Schmittberger, and Schwarze (1982) conducted ultimatum game experiments and found that sub- jects’ behavior deviated from the predicted equilibrium in two ways: Offers were much closer to an equal split of the money than predicted, and respondents were found to reject some positive offers. These re- sults so clearly contradict the predicted equilibrium that a number of other studies have resulted. (For partial surveys see Guth & Tietz, 1990; Roth, 1995; and Thaler, 1988.) It is now clear that the results ob- tained by Guth et al. were no fluke: Behavior in these experiments al- ways deviates from the predicted equilibrium. This behavior in the laboratory suggests that there are motivators of human behavior that the basic economics models have not considered. These and other stud- ies indicate the sensitivity of this setting to factors other than simple monetary payment.

More recent models of strategic behavior successfully incorporate nonmonetary motivations for behavior. Examples include studies on

BUYING STATUS 385

altruism or warm glow, relative earnings, and reciprocal fairness [e.g. , Andreoni, 1989 (altruism); Bolton, 1991 (relative earnings); and Ra- bin, 1993 (reciprocal fairness)]. In this set of experiments, status is ex- amined as a nonmonetary motivator in the ultimatum game.

Evidence also emerges from ultimatum game experiments that group identity is an important determinant of behavior, both across groups and in the interaction among groups. Outcomes differ systematically when subjects of different countries of origin or gender play the game with their fellow countrymen. Roth, Prasnikar, Okuno-Fujiwara, and Zamir (199 1) report the results of ultimatum games conducted in Israel, Japan, Yu- goslavia, and the United States. The behavior of subjects differs system- atically by country, which suggests that cultural differences affect the group consensus about what is appropriate play. For example (p. 10821, from a fixed pie of 1000 tokens, “[Iln the United States and in Yugoslavia, the modal proposal is 500, while in Japan and Israel the modal proposal is 400.” They also report significant differences in patterns of rejections, with Japanese subjects exhibiting the lowest rejection rates.

Eckel and Grossman (1994) examine interactions between men and women in ultimatum games in which subjects face members of the same or the other gender. They find that the behavior of men and women de- pends on the gender of their partner. Women are slightly more generous than men on average, but both men and women are more generous to male than female respondents. Their strongest results are significant differences in rejection rates: After accounting for differences in the size of offers, women’s proposals are more likely to be accepted than men’s. Although race is not a treatment factor in their experimental design, they also find what appears to be a dramatic difference between African-American and non-African-American subjects. They speculate that these outcomes are due to socioeconomic or cultural differences. Because race was not an explicit treatment factor in their design, how- ever, they are unable to differentiate the impact of the race of their part- ner on subjects’ decisions. These differences between the way groups respond to a negotiation exercise correspond to the types of differences noted in studies of status goods in marketing and support the choice of the ultimatum game as a vehicle for studying status.

The importance of status can be inferred from earlier experimental work. Hoffman and Spitzer (1985) study bilateral bargaining problems where one of the two subjects, called the controller, has unilateral au- thority to decide the outcome of a negotiation game in the event of dis- agreement. They find that controllers are most willing to exploit their power when they are assigned their role based on a skill test and told that they had earned the right to be the controller. Earning the right to be controller effectively confers status on the subjects, making them think they deserve the more powerful position. Hoffman and Spitzer give their controllers two things simultaneously, an entitlement and status: The experiments discussed here disentangle these two factors.

386 BALL AND ECKEL

The next section of this work discusses the experiment conducted by Ball and Eckel(1994). The third section reports the results of their re- search. In the fourth section the application of their results for the marketing professional is discussed. The final section concludes with a discussion of some of the ramifications for society of individuals’ con- cern with status.

Description of Experimental Method

The present study tests whether artificial division into high-status and low-status groups affects subjects’ decisions in ultimatum games. These experiments differ from previous work in social psychology on groups and status in the following ways:

1. Subjects risk their own actual economic gain. 2. An ultimatum game institution is used to allow respondent data

as well as proposer data to be collected.

Subjects are divided into two groups; one group is given stars to wear based on their results on a trivia quiz, thus conferring status on this group of subjects. The star is a status good that is awarded to subjects who demonstrate the designated behavior on the trivia quiz. Following Turner and Brown (19781, subjects should think that subjects with stars are more deserving than their no-star counterparts. Note that an artificial status distinction was created for the purpose of this experi- ment. This was done to assure that all subjects recognized who the high-status designees were. If subjects had been sorted based on the researcher’s perception of which subjects held the highest status (for example, putting outstanding members of the football team in the high-status group with nonteam members in the low-status group) every subject may not have agreed which group held higher status.

Subjects were then divided into clusters where players with and without stars are paired with players in their own group and in the other group, as shown in Table 1 below. All subjects were expected to discriminate against the undeserving No-Stars.

Table 1. Experimental Design.

Respondent

High Status Low Status Proposer (Star) (No Star)

High Status Group SS Group SN

Low Status Group NS Group NN (Star)

(No Star)

BUYING STATUS 387

The following hypotheses are tested: Hypothesis 1: All proposers will make higher offers to the High-Sta- tus respondents than to the Low-Status respondents.

Experiments were conducted with both low and high payments. Be- cause discrimination in the form of an unequal offer to any group risks rejection, less discrimination was expected when the cost of a rejection is high. This is formalized as:

Hypothesis 2: Discrimination will diminish as payment increases.

The participants in both the low and high payment treatments of this study were undergraduate volunteers recruited from principles of eco- nomics courses. They were told that the experiment would last less than 2 hours and that their earnings would depend on their decisions in the experiment. Individual subjects’ performance was kept confidential.

Subjects participated in an ultimatum game where proposers were asked to divide either $10 in 1~ increments (the High-Pay treatment), or 10 Hershey’s Kisses in one-Kiss increments (the Low-Pay treat- ment). They indicated the amounts they proposed to keep to the re- spondent, who could then either accept or reject the proposed split. Rejection resulted in zero payment to both subjects. Each subject par- ticipated in only one ultimatum game in one experimental session. Each experimental session involved eitkler the high-payment or the low-payment treatment. (See Ball & Eckel, 1994, for complete details and instructions.)

Subjects were told that they would be assigned to groups based on their answers to a quiz. They were then asked to complete an eco- nomic trivia quiz. Quiz answers were all numerical. To assign subjects to groups subjects’ answers were summed, and those subjects whose sum was above the median were assigned to one group, and those whose sum was below the median were assigned to another group. We chose questions so that this method of division would not separate subjects who were economic optimists from those who were economic pessimists. Note that groups were not formed by selecting those who had the most correct answers. This is because it was undesirable for any group to be comprised of the subjects who were the smartest or best at economics. If this had occurred then the experiment might have measured a systematic difference between the bargaining behav- ior of students who were better a t economics as compared to those who were worse at economics instead of measuring differences caused by status-in other words, experimental control would have been lost.

A similar method has been employed by social psychologists. Com- mins and Lockwood briefly show students a piece of paper covered with dots, then ask them to guess how many dots they saw. They claim to sep- arate those with above-median guesses from those with below-median guesses; however, subjects actually are randomly assigned to groups. An

388 BALL AND ECKEL

economics quiz was chosen to suggest to subjects that the quiz was an important part of the experiment and thus strengthen the manipulation.

Subjects were divided into four clusters as shown in Table 1. Sub- jects were seated with proposers facing respondents in each cluster. This was done to be sure that subjects understood the group from which their opponents would be chosen. Each subject then received a folder with the remaining forms, and completed a pretest to check the subject’s understanding.

The ultimatum game was then conducted. When the experiment was completed, a questionnaire was distributed to collect demographic information and allow the subject to record his or her strategy. In all sessions both experimenters were present, and each performed the same role in every session. Once an experimental session was com- pleted subjects were paid anonymously the amount of money (or Kisses) they earned during the experiment.

Stars p. = 5.875 p. = 6.249

No Stars p. = 6.074 p. = 6.292 n = 16

n = 17

n = 18

n = 18

Overall p. = 5.977 p. = 6.271 n = 33 n = 36

Results

Table 2 contains the mean amount kept by subjects in each of the treatment cells for the experiments reported in Ball and Eckel (1994). Looking first at the Low-Pay or Kisses treatment, both Star and No- Star proposers are more generous with Star respondents than No-Star

p. = 6.073 n = 34 p. = 6.186 n = 35

p. = 6.130 n = 69

Table 2. Mean Amount Kept by Proposers and Number of Observations.

A. Low-Pay Treatment (Kisses)

Proposers

Respondents Stars No Stars Overall

Stars

No Stars

p. = 5.00 n = 10 p. = 6.40 n = 10

p. = 5.60 n = 10 p. = 6.91 n = 11

p. = 5.30 n = 20 p. = 6.67 n = 21

Overall p. = 5.70 n = 20

p. = 6.29 n = 21

B. High-Pay Treatment (Dollars)

p. = 6.00 n = 41

Proposers

Respondents Stars No Stars Overall

BUYING STATUS 389

respondents. Figures 1 and 2 illustrate these results: There is a strik- ing difference between the amounts kept by proposers facing star op- ponents and those facing respondents without stars. This difference is especially large for the No-Star proposers.

The results of the High-Pay (dollars) treatments are shown in Fig- ures 3 and 4. Here there are no apparent differences in the distribu- tions of offers across treatment cells. This is confirmed in Table 2: No cell is significantly different from any other.

Earnings are compared in Table 3. Subjects with stars earned more than subjects without stars, though the difference is much greater for the Low-Pay treatment (31%) than for the High-Pay treatment (3%).

Data are tested with the use of the Epps-Singleton test (Epps & Singlton, 1986). This is a nonparametric test designed to distinguish between different sample distributions. Forsythe et al. (1994) evaluate the power of this and four other such tests (Cramer-von Mises, Anderson Darling, Kolmogorov-Smirnov, and Wilcoxin rank-sum), and find that the Anderson Darling and Epps-Singleton tests have the most statistical power with ultimatum game data. Epps-Singleton is also ap- pealing because it does not require that the distributions be continu- ous. This is clearly appropriate for the Kisses payment treatment, and because very few subjects chose a dollar amount that was not even, it is also appropriate for the dollars treatment.

Table 4 presents the results of Epps-Singleton tests of the null hy- pothesis that the distributions of proposals are equal. On average, pro- posers offer more to respondents with stars than without. This result is primarily due to the very strong differentiation by No-Star pro- posers by the status of their respondent. Interestingly, in no case did any subject mention the stars in recording their strategy.

A comparison of the Low-Pay and High-Pay treatments is shown in Figure 5. No significant differences are found. Analysis of the demo- graphic data also yielded no significant results.

Value for the Practitioner

For any good, status is one of many product attributes that contribute to a consumer’s enjoyment of the product. As such, marketers should choose product strategies with an understanding of status’s role in the purchasing decision. The purchase of a product can increase an indi- vidual’s status in two ways. The first is through the acquisition of sta- tus goods, material possessions that are purchased in order to impress others. Status goods exhibit one or more of a number of elements, such as luxury, exclusivity, or endorsement by a celebrity. For example, a celebrity’s endorsement of a product allows him or her to transfer some his own star status to the product (Kamins & Gupta, 1994). A consumer who buys the product will be seen as having higher status

Text continued on page 395

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Table 3. Average Earnings of Subjects by Status and Payment.

Status

Payment Star No Star

High Payment 4.37 4.24 Low Payment 4.20 3.19

than one who buys a similar product that lacks an endorsement. A product also can be endowed with status because it incorporates an es- pecially appealing innovation. Tennis shoes with lights in their heels and cellular telephones are such examples for societies of children and adults respectively.

The second way that purchasing goods can increase status is through goods that facilitate the development of status characteristics. Berger, Fisek, Norman, and Wagner (1983) define it as follows:

A status characteristic is a characteristic of an actor that has two or more states that are differentially evaluated in terms of honor, es- teem, or desirability, each of which is associated with distinct moral and performance expectations, that is, with beliefs about how an indi- vidual possessing a given state of the characteristic will perform or behave. (p. 131)

In other words, a status characteristic affects people’s expectations rewards or earnings in a particular situation. For example, beauty considered a status characteristic, and if a consumer believes that a particular brand of shampoo will enhance her beauty, she might be- lieve that the product will enhance her status.

The basic idea of status characteristics theory is that if individuals can be differentiated by some valued status Characteristic, they will form

of is

Table 4. Epps-Singleton Tests for Differences in the Distributions of Offers.

Treatment

Low Pay High Pay (Kisses) (Dollars)

Comparison of proposals By Star vs. No-Star proposers To Star vs. No-Star respondents

Comparison of treatment cells: SS vs. SN NS vs. NN SS vs. NN SN vs. NS

1.926 19.271

3.097 45.590 17.691 2.193

2.146 2.219

2.263 0.607 2.256 1.437

All statistics are distributed X2 with 4 degrees of freedom. Critical values forX2 (4): 9.50, 95% level (one-tailed); 13.28, 99% level (one-tailed).

BUYING STATUS 395

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Percent Obsenred

Percent Observed

expectations of the performance capabilities of those persons who pos- sess the valued characteristics. These expectations will influence the for- mation of the group’s hierarchy of power and prestige. Persons with low status will tend to defer to and be influenced by those of high status.

Status characteristics can be either general or specific. General characteristics- such as sex, age, race, physical attractiveness, or in- telligence-are not restricted to the given situations motivating the group interaction. Specific characteristics - such as knowledge of au- tomobile mechanics - are restricted to specific situations. For exam- ple, if the group task is to tune an automobile engine, men and automobile mechanics might be considered high status; men because they are believed to be more mechanically minded than women, and automobile mechanics because of their specific training.

Expectation state theory examines evidence of the influence of status characteristics: Examples include studies on age, race, sex, physical at- tractiveness, educational abilities, et cetera [e.g., Freese & Cohen, 1973 (for age); Sev’er, 1989, and Webster & Driskell, 1978 (for race); Hegtvedt et al., 1993 (weakly, for sex); Dion & Dion, 1987 (for physical attractive- ness); Schwarzwald & Hoffman, 1993 (for educational abilities); and Berger, Balkwell, Norman, & Smith, 1992, Berger & Fisek, 1970, Freese, 1974, and Freese & Cohen, 1973 (for a variety of specific status charac- teristics)]. Research shows that high-status individuals discriminate in favor of equal-status individuals and against lower-status individuals (see, for example, Hagendoorn & Henke, 1991; and Sachdev & Bourhis, 1987). Some status characteristics are inherent, but there are things that people can do or purchase in order to increase their status.

The role of physical attractiveness in shaping purchasing decisions is a topic that receives much attention. Bloch and Richins (1992) ana- lyze the benefits of being attractive and find there to be three. The first is personal utility from being attractive. The second is enjoyment of others’ positive reaction to one’s attractiveness; this is beauty as a status characteristic. Hammermesh and Biddle (1994) quantify this result. They demonstrate that plain people earn 5-10% less money than average-looking people who earn less than attractive people. Fi- nally, Bloch and Richins note that adornments can be enjoyed for their own sake, Whether a seller can exploit her own attractiveness for profit is the subject of Caballero, Lumpkin, and Madden (1989), who fail to show any systematic relationship between attractiveness of the seller and purchasing decisions. Other studies have shown that pur- chasing decisions can be positively or negatively related to the attrac- tiveness of the seller.

Marketing Status

The marketing value of status lies in its ability to increase a pro- duct’s profitability. Given two otherwise identical products, the one

BUYING STATUS 397

consumers associate with high status will command a higher price, be- cause people will pay to achieve status. A successful marketing strat- egy will invest resources to increase the real or perceived status associated with a candidate product until the marginal cost of the marketing campaign equals the marginal increase in profit caused by status-induced increase in demand. These principles apply equally to status goods and goods that enhance status characteristics.

Successful marketing of status must acknowledge that some groups of consumers are more susceptible to its allure. Asian consumers, per- haps because of the structure of their society, tend to be very status- oriented. As their countries’ economies become more Westernized, Asians are a growing market for various types of status-related goods (Gallagher, 1993; Sternberg, 1993; Yarnell, 1994). However, market tests show that Hispanics reject image-oriented advertising in favor of advertising that focuses on product use and features (Sanchez, 19921, making this a less productive market for status-related market- ing campaigns. Older Americans also are less susceptible to status- oriented advertising. Subjectively oriented means that someone desires a product for its own sake. An objectively oriented person de- sires to reach some objective, such as the esteem of others, and his de- mand for the product is for the purpose of furthering that objective. Older Americans are more subjectively oriented, as opposed to the ob- jectively oriented younger people, who are very dependent on external cues. As such, older persons seek products that also contribute emo- tionally or psychologically rewarding experiences that facilitate per- sonal growth or help others (Wolfe, 1992). For example, a young person might choose to visit Bali partly because all her friends would have a positive reaction to her going to such an exotic place. If she were 70, the opinion of her peers would be less important than the characteristics of the place itself. Baby boomers are very status-ori- ented, even in the clothing they choose for their preschool-age children (Miller, 1992).

Marketing the status associated with a good also requires careful attention to ever-changing consumer behavior. One reason this hap- pens is that consumers’ opinions of status characteristics and status goods evolves over time. For example, changing women’s roles in the past 50 years have changed the way that goods are marketed to women. Status is associated with more work-oriented products than in the past (Bate, 1993). Purchases of status goods are also linked to the condition of the economy. In an economic downturn, low consumer con- fidence will make consumers less willing to pay an additional amount for the increased social value of status. As the economy recovers, buy- ing status again becomes important to consumers (Underwood, 1994; Warner, 1994).

There are differences between the specific marketing strategies that would be employed with status goods compared with goods that en-

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hance status characteristics. A status good would, for example, be fea- tured in an advertisement which suggests that i t is a status good: for example, a sports hero might be seen drinking a particular soft drink. The soft drink does not make the sports hero a good basketball player, but he does choose to drink it. A product that facilitates the develop- ment of status characteristics must be shown to increase the desirabil- ity of the person who is using the product: for example, a person who claims to be chronologically old but who appears to be young professes to take a particular brand of vitamin. In this case the vitamin is cred- ited with enhancing the individual’s youthfulness - a status charac- teristic.

Experimental Validity

Historically, economics research has been conducted as if it were a sci- ence that could not be studied by experimentation. For this reason economists did not have a body of behavioral principles that had been tested and formed the basis of their theories and teachings. Only very recently has this changed, with economists beginning to test the theo- ries they had previously only been able to support with mathematical proofs or field study data. Experiments in economics are much like those in other fields; we create a controlled environment and study what happens in that environment. The difference is that the experi- ments examine human behavior in individual decision-making situa- tions.

Amajor concern of a practitioner reading this work should be the validity (relevance) of the data. These concerns can be divided into two categories. Internal validity concerns the question of whether any con- clusions about the experiment can be drawn given the way the data were collected and analyzed. External validity questions center on whether generalizations to the outside world can be drawn from the results of the experiment.

There are a number of arguments which can be made about these experiments’ internal validity. Attention was paid to experimental con- trol, that is, ensuring that the only elements that varied between ex- periments were those chosen by the experimenters. There were three variables in these experiments: whether the proposer had status, whether the respondents had status, and whether the payment for the experiment was in dollars or Kisses. Other variability was avoided by conducting each experiment in the same manner: using the same ex- perimenters and instructions, using subjects who were all demograph- ically similar, testing whether measurable demographic differences (for example, age) affected subject performance, and preventing sub- jects from communicating anything other than bids and acceptances during the experiment.

Control was also established by rewarding subjects for the outcomes

BUYING STATUS 399

produced by their decisions in a way that was understood by the sub- jects before the experiment began; this is often referred to as saliency. The reward medium was chosen so that subjects preferred more to less. The combination of saliency and award choice allowed the experi- menters to conclude that subjects chose their behavior in order to try to obtain as much as the reward as possible.

Although it seems clear that subjects would prefer more money to less, one might question whether the same was true for Kisses. Statistical analysis shows that aggregate behavior was the same when subjects were paid in Kisses as in dollars, however, which sug- gests that subjects did not become satiated in Kisses. Informal ob- servation of subjects’ behavior and postexperiment debriefing suggest that subjects were just as eager to earn more Kisses as they were to earn more dollars. Any subject who did not want any Kisses was free to leave before the experiment without penalty. Finally, Kisses were chosen as the low payment treatment because they were wrapped and some or all could be saved for later. The conclusions of the experiment are unlikely to have been significantly different if dimes were used instead of Kisses-the purpose of this treatment was merely to test whether the level of payment would change the ef- fect of status.

External validity of the experiment is an issue of greater concern. It has motivated this set of experimenters to plan further work on whether status matters in other economic environments besides bar- gaining. Preliminary results suggest that high-status subjects earn more in markets than low-status subjects, and future experiments are being planned. As status is shown to be a factor in a greater number of experimental environments, it will be more comfortable to use induc- tion to conclude that it must also matter outside of the laboratory.

Discussion

In the video presentation “A Class Divided,’’ Jane Elliott, an elemen- tary school teacher, describes a classroom exercise where she divides her class into two groups depending on the color of their eyes. By treating one group as if they are superior to the other, she induces quite strong discriminatory behavior by the favored group. When roles are reversed a few days later, even stronger retaliatory discrimination emerges. Tajfel, in an article in Scientific American (1970) notes that mere division into groups is enough to trigger discrimination. If dis- crimination is so easy to induce, then it is something that must emerge in economic behavior as well as other forms of social behavior.

In these experiments, subjects indeed appear to discriminate when divided into low-status and high-status groups: a mere star induces subjects to behave differently. However, subjects recognize that, “dis- crimination by any group reduces their own incomes. . .” (Becker,

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1976, p. 17). When the potential rewards of the experiment are high, this discriminatory behavior disappears.

There is no reason to believe that differences between the status of groups are necessarily based on measurable differences. Many historical and current examples exist of groups who were deemed to have low sta- tus because members of their race or gender were considered to be less capable workers than the high-status group. As such they were hired less often and paid lower wages than the high-status group. Empirical evidence can often refute such justifications for disparate treatment of groups. For example, after controlling for productivity-related attributes, women still earn 14% less than men (Blau &Khan, 1994). Women are also not proportionally represented in high-level management positions.

The economic importance of status allows products that are associ- ated with high status to command a premium over other products. This makes marketing products so that consumers will perceive them as high-status a productive enterprise. The importance of status in shaping economic interactions justifies the quest for status.

As noted above, status goods are more important to some groups of consumers than others, and their importance also ebbs and flows with changes in the economy and social norms. The connection between the demand for status goods and the economy is related to the result on the importance of the stakes. For a given price (or price differential), someone with lower income prospects (as in an economic downturn) will find the stakes to be relatively higher than someone with higher income prospects (as in a period of economic prosperity). Future re- search should investigate whether status goods are more important to low-status groups than high-status groups.

On the other hand, most of the research on status characteristics fo- cuses on what a status characteristic is and how status characteristics affect behavior. Specific research on which goods facilitate develop- ment on status characteristics and how this occurs are open topics for research. This will allow marketing professionals to further refine the marketing strategies they employ.

Ireland (1994) models a society where individuals care how others view them. Individuals have a true status level and consumption choices can signal higher than actual status levels. He shows that everyone would be better off if no one engaged in this signaling behav- ior and suggests that taxes on positional goods could improve the wel- fare of society. Adam Smith (1982) deplored expenditure for the sake of status (which he terms “place”) two centuries ago:

And thus, place, that great object which divides the wives of alder- men, is the end of half the labors of human life; and is the cause of all the tumult and bustle, and the rapine and injustice, which avarice and ambition have introduced into this world. People of sense, indeed, despise place . . . (p. 57)

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Although Smith may have overstated his case, this line of argument suggests that society’s focus on status is a standard multiplayer pris- oner’s dilemma problem. All else held equal, high-status individuals achieve better outcomes than low-status individuals, so attempts to gain high status make economic sense. On the other hand, we would all be better off if no one bought status.

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The authors wish to thank Robin Dawes, Rob Gilles, Steven Kachelmeier, Kevin McCabe, Nancy Lutz, the editor, Richard Beil, and an anonymous ref- eree for helpful advice and suggestions. Funding for this project was provided by the Department of Educational Technologies at Virginia Polytechnic Insti- tute and State University. The project was completed while Eckel was visit- ing the Economic Science Laboratory at the University ofArizona. She is grateful for the support of the Gilder Foundation Post-Doctoral Fellowship.

Correspondence regarding this article should be sent to: Sheryl B. Ball, Department of Economics, Virginia Polytechnic and State University, 3016 Pamplin Hall, Blacksburg, VA 24061 (e-mail: SBALL@VT.edu).

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