Feeling Down? Science Says Go Shopping (But Use Credit)
Retail therapy: It's the answer for almost any problem. Girlfriend broke up with you? Didn't get that promotion? Buy yourself something pretty. People like to shop, especially for high-status items, when they're feeling down. Decades of research has indicated that when a key feature of one's identity is threatened - such as by being passed over for a promotion or being dumped by a former lover - people turn to things. Possessions can allow us to signal our awesomeness to others. And if others think we're awesome, then we just might begin to remember just how awesome we are in the first place.
For example, in one experiment, people who were sad (but not clinically depressed) were willing to pay more for various products than participants who were emotionally neutral. In other words, their decision-making processes were skewed away from making optimal economic choices (maximizing profits and minimizing losses), in favor of the more immediate goal of changing their mood. So, we head to the mall in an effort to bring our self-esteem back to normal levels.
But parting with cash is also a painful process, so what gives? In a new paper in the journal Social Psychological and Personality Science, researchers Niro Sivanathan of the London Business School and Nathan Pettit of Cornell University describe how they think people resolve this conflict. Their answer: credit cards. Pettit and Sivanathan studied whether people might be more likely to use a credit card when engaging in retail therapy.
First, they wanted to find evidence that people were more likely to spend with credit than with cash when their self-esteem had been threatened. 160 college-age students were given a test that measured their spatial reasoning and logic ability. After the test, they were told how they had scored on the test. Actually, their performance on the test was irrelevant: half of the students were simply told that they scored in the 12th percentile (meaning they performed worse than 88% of students their age), and half were told that they scored in the 88th percentile (meaning they performed better than 88% of students their age). If Pettit and Sivanathan are right, then the students who had been made to feel stupid should have been more likely to opt to pay for "a consumer product that [they had] been considering purchasing" with credit rather than with cash. And this is exactly what they found.
A second experiment probed a bit deeper. Is the preference for credit universal, or does it only apply to some kinds of purchases? This time, the researchers had 150 university students think about paying a pair of jeans. Half of them were asked to think about pricey, high-status, designer jeans, and the other half were told to think about regular low-price jeans. Then they were given the same "spatial reasoning and logic ability" test that the students from the first experiment completed. As expected, those who had their self-esteem threatened were 60% more likely to prefer to buy the jeans with credit. This simply replicated the initial finding. Even more interesting, though, was that the effect was only found for the expensive jeans. More specifically, when cash was the only option, the threatened students were no more likely to purchase the high-status jeans than were the non-threatened participants.
Taken together, these findings validate Pettit and Sivanathan's initial hypothesis. "These results," they wrote, "suggest that when individuals are under self-threat, and therefore seeking to repair their wounded egos, they increase their spending on compensatory high-status goods only when the psychological cost of payment can be minimized" (emphasis added). In other words, retail therapy only works when high-status items can be purchased on credit.
What does it all mean? This is one of the first scientific studies that investigated the impact of self-threat on both what people buy as well as how they buy it. The researchers found that the more people were able to separate the pleasure of shopping from the pain of spending, the more they were likely to "seek solace in high-status goods." Critically, this model offers a suggestive explanation for the 2008 American "credit crisis."
The increases in credit card debt among those with lower incomes might be explained, at least partially, by the fact that their financial reality caused them to rely on credit for purchases of luxury items meant to signal their status to others. Individuals with lower socioeconomic status often have lower self-esteem and, ironically, these individuals are more likely to buy expensive things to repair their low self-esteem. All of this despite the fact that they can't afford those purchases in the first place. And the relaxed lending policies that were in place didn't help! Indeed, the researchers noted, "together, the desire to affirm the self by consuming high-status goods, the preference to do so with credit, and the increased availability of credit among the income constrained may have come together to create optimal conditions for those who could least afford superfluous expenditure to spend more through particularly costly means (credit)." If economic regulators want to prevent future similar credit crises, they might consider a lesson in consumer psychology and make it harder, not easier, for those with lower incomes to rely on credit.
Nathan C. Pettit, & Niro Sivanathan (2011). The Plastic Trap: Self-Threat Drives Credit Usage and Status Consumption Social Psychological and Personality Science, 2 (2), 146-153 : 10.1177/1948550610385138
The original journal article is available free for a limited time.