Consumer Consequences of Economic Inequality

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Date
2023-12-20
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Publisher
Virginia Tech
Abstract

Despite the growing body of research in related disciplines, including economics, management, politics, psychology, and sociology, marketing research has largely overlooked the downstream consequences of economic inequality, despite its undeniable impact on individuals' consumption decisions and experiences. This dissertation endeavors to bridge this knowledge gap by uncovering two novel consumer consequences of economic inequality. To accomplish this, it draws upon a diverse range of data sources, including individual-level experimental and survey data, as well as aggregate-level transaction and census data. Additionally, it examines economic inequality across multiple levels, encompassing communities, counties, states, and countries, and operationalizes it both as objective and perceived economic inequality.

In Essay 1, I investigate how economic inequality in a consumer's region affects their access to peer-to-peer (P2P) services. Across diverse types of P2P services, I find convergent evidence that increased economic inequality in a consumer's region reduces providers' willingness to serve them, ultimately resulting in their diminished access to P2P services. This adverse effect of economic inequality can be attributed to providers perceiving consumers from more unequal regions as less trustworthy. This perception leads them to perceive heightened financial risks associated with serving these consumers. Moreover, this negative impact of economic inequality attenuates when providers perceive greater interpersonal similarity with consumers from unequal regions.

In Essay 2, I explore how economic inequality within one's society affects their education decisions through the lens of perceived education premium. Firstly, it encourages people to attend college as it amplifies the perceived education premium of college—the income gap between college graduates and high school graduates. Secondly, it motivates people to choose majors with higher earning potential but lower personal interests, as opposed to those that align more with their genuine interests but pay less. This shift towards prioritizing extrinsic motivations over intrinsic ones is driven by people's perception of a more significant education premium between majors—the income disparity between higher-paying and lower-paying majors.

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Keywords
Economic Inequality, Peer-to-peer Services, Trustworthiness, Financial Risk, Digital Discrimination, Education Premium, College Decision, Choice of Major
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