Social Comparison and Consumer Behavior: When Feeling Richer or Poorer Than Others Is More Important Than Being So

Social Comparison and Consumer Behavior: When Feeling Richer or Poorer Than Others Is More

Important Than Being Sol

NIKLAS KARLSSON,* TOMMY GARLING, PETER DELLGRAN, AND BIRGITTA KLINGANDER

Goteborg University Goteborg, Sweden

The present study investigates how households’ social comparisons of their economic situation affect purchase decisions. In structured telephone interviews, participants ( n = 109) answered questions about purchases of durable goods and groccries. In line with the hypothesis, social comparisons had an efl’ect on purchase decisions of durable goods when controlling for actual economic situation. Households that considered themselves to be worse off economically than others reported fewer purchases of durable goods, perceived the impact on their economy of their latest purchase to be greater, and planned purchases more carefully than did households that considered themselves better off economically than others. Also in line with the hypothesis, for purchases of groceries, households’ actual economic situation was more important than social comparisons.

With limited economic resources, households prioritize and make decisions to satisfy their needs and wants. Households’ income and wealth set boundaries for how much they can consume. When making purchases, households therefore frequently raise the question of whether or not they can afford the purchase.

How do households know what they can afford? Certainly, income and wealth constitute one basis for such an evaluation. Another basis is what other products and services households need or want to buy using the same limited resources. In the present study, we assume that still another basis is how households evaluate their own economic situation in relation to other households. The purpose is thus to shed light on how purchases of durable goods and groceries are influenced by households’ evaluations of their own economic situation in comparison with that of others.

‘This research was supported by Grant F001511999 to Tommy Garling from the Swedish Council for Working Life and Social Research. The authors thank Amelie Gamble for conducting the telephone interviews, and Henrik Svedsater for assistance with the statistical analyses.

Torrespondence concerning this article should be addressed to Niklas Karlsson, Department of Psychology, Goteborg University, Box 500, SE-405 30 Goteborg, Sweden. E-mail: Nikas.Karlsson@ psy.gu.se

Journal of Applied Social Psychology, 2005,35,6, pp. 1206-1222. Copyright 0 2005 by V. H. Winston & Son, Inc. All rights reserved.

SOCIAL COMPARISON AND CONSUMER BEHAVIOR 1207

Empirical research demonstrates, in contrast to predictions from the life-cycle hypothesis (Modigliani & Brumberg, 1954), that households’ current income is an important determinant of their consumption (Deaton, 1997; Heath & Soll, 1996; Karlsson, Giirling, & Selart, 1999; Shefrin & Thaler, 1988). In this vein, in two preceding studies we investigated different aspects of how households’ economic situations affected their consumption. First, we analyzed Swedish household expenditure data from 1988 to 1996 (Dellgran & Karlsson, 2001). The results revealed that income and household type (i.e., single or couple, with or without children) accounted for a substantial proportion of variance in the total household consumption. At the same time, it was clear that these factors only explained certain types of consumption.

While income and household type largely accounted for the consumption of necessary nondurables (e.g., groceries), it accounted to a much lesser extent for consumption of necessary durables (e.g., furniture), more luxury durables (e.g., a new car), and more luxury nondurables (e.g., eating at restaurants). Following up on these results, we conducted a survey of households’ consumption of more luxury products and services (Karlsson, Dellgran, Klingander, & Garling, 2004). Karlsson et al. revealed that while the household economic situation had only a weak direct effect on consumption of more luxury goods and services, it had indirect effects through aspiration level and social comparison. Thus, the better the househo1d’s economic situation, the more the household considered different goods and services to be necessary (aspiration level), and the more they evalu- ated their economic situation to be better than others’. Furthermore, consumption increased substantially with these two factors.

Social comparison has been recognized as influencing people’s evaluatins of their abilities and outcomes (Festinger, 1954; Suls & Wheeler, 2000). People tend to compare themselvs with similar others on related attributes (Miller & Prentice, 1996), and typically they report that they are better off than others (Taylor & Brown, 1988). People are influenced by others because it leads to rewards and appreciation, because it is a way of avoiding dislike and punish- ment, and because the behavior of others provides information that reduces uncertainty about one’s own ability or the utility of goods or activities (Aronson, 1994; Deutsch & Gerard, 1955). Also, people’s needs and wants are shaped by others. People buy what others are buying to project a favorable image and to achieve status (Corneo & Jeanne, 1997), and they do it because it makes them less uncertain that the things they are buying are worth buying. However, comparison with others may not only influence what households want to buy, but also their evaluations of whether or not they can afford to buy something. Thus, seeing one’s own household as being economically better or worse off than others’ may be used as a cue as to whether or not one can afford a purchase, and therefore affects decisions on whether or not to make a purchase. For instance, people may be more likely to purchase something if they think they are

1208 KARLSSON ET AL.

better off economically than other people who can afford what they are consider- ing buying.

As Festinger (1954) observed, a major aim with social comparison is to answer the question “Can I do X?” (Martin, 2000; Wheeler, Martin, B Suls, 1997). Hence, as for other abilities, it seems reasonable to assume that when people evaluate whether or not they are able or can afford to buy something, they also compare their own economic situation (i.e., economic ability) with that of others. It also seems reasonable to assume that households can and do compare their own economic situation with that of others. For instance, research on the effects of inequality shows that people compare incomes, and that such comparison affects their well-being (e.g., Hagerty, 2000). Furthermore, even if people do not exactly know the economic situation of their neighbors, fiiends, and relatives, they are likely to have at least a rough idea from knowing other things, such as how much they work and what type of job they have.

Another issue concerns whether social comparison of the economic situation influences purchase decisions by being a cue as to whether or not the household can afford a purchase, or if it affects purchase decisions for some other reason. For instance, social comparison of the economic situation may affect households’ desires or wishes to purchase something, rather than the perceived ability to it. There are at least two reasons why social comparison of the economic situation may affect purchase decisions through evaluation of ability, rather than through changes in desire. First, even if a household’s desire to purchase something decreases when they see themselves as worse off than others, it is parsimonious to assume that social comparison of the economic situation influences purchase decisions as such, rather than being mediated by changes in desires. Second, and more important, in our previous study of consumption of more luxury products and services (Karlsson et al., 2004), aspiration level (i.e., households’ perceived necessity of products and services) and social comparison of the economic situation had independent effects on level of consumption. Furthermore, social comparison had no effect on aspiration level, which it should have had if social comparison influences consumption through changes in desire.

How households perceive their economic situation in relation to others is related to their actual economic situation. That is, the better a household’s economic situation, the more likely the household is to perceive itself as better than others. However, when controlling for the actual economic situation, we also assume that households that regard themselves to be better off than others will consume more than will households that regard themselves as worse off than others. This assumption was supported previously (Karlsson et al., 2004).

In the present study, we hypothesize that part of the effect of social comparison on consumption stems from differences in the process of making purchase decisions. In line with previous research on social comparison (e.g., Wheeler et al., 1997), we assume that households make social comparisons of their


economic situation to reduce uncertainty when they consider making a purchase. Even if this is likely to be a dynamic process, in the present study, we assume that the tendency to make upward comparisons (i.e., regarding one’s own household as worse off) or downward comparisons (i.e., regarding one’s own household as better off) has such stability that differences in how households make social comparisons predict purchase decisions. Thus, households that view themselves as better off will be more likely to believe they can afford to buy products and services. As a consequence, it is hypothesized that these households believe these purchases will have less impact on their economy, will be less carefully planned, and will be less important for their well-being than will households that regard themselves as worse off than others.

In order to investigate how purchase decisions are affected by differences in how households view their own economic situation in relation to that of others, we conducted a structured telephone interview. In one part of the interview, we asked questions about respondents’ latest purchase of a durable good; while in another part, we asked questions about grocery shopping. For the purchase of durable goods, our overall hypothesis is that households’ social comparisons of their economic situation with other households will have a larger impact on their purchase decision than will their actual economic situation. We define the actzial economic situation as current income and wealth in terms of disposable assets. However, for the purchase of groceries, in line with our previous results (Dellgran & Karlsson, 200 l), we expect that current income will have a larger impact on the purchase decision than will social comparisons. Households are less likely to make social comparisons when the purchase concerns groceries, since such purchases are neither novel or associated with large costs (Martin, 2000). Based on these overall predictions, we posit the following, more specific hypotheses:

Hypothesis 1. When controlling for actual economic situation, households that view their economic situation as worse than that of others will purchase less than will households that view themselves as better off than others.

Hjpothesis 2. When controlling for actual economic situation, households that view their economic situation as worse than that of others will refrain from making purchases to a greater extent than will households that view themselves as better off than others.

Hypothesis 3. When controlling for actual economic situation, households that view their economic situation as worse than that of others will believe that a purchase has a larger impact on their economy than will households who view themselves as better off than others.


Hypothesis 4 . When controlling for actual economic situation, households that view their economic situation as worse than that of others will plan a purchase more carefully than will households that view themselves as better off than others.

Hypothesis 5. When controlling for actual economic situation, households that view their economic situation as worse than that of others will believe that a purchase is more important for their well- being than will households that view themselves as better off than others.

Hypothesis 6. Social comparison of the household’s economic situation will have less impact than will the household’s actual economic situation on the purchase of groceries.

Method

Participants

A total of 41 1 households participated in a questionnaire study. The questionnaire was sent to a sample of 1,110 randomly chosen households (response rate =

37.0%) in a metropolitan area of Sweden. Of households that responded, 26.3% of the respondents were single, 5.9% were single parents, 37.4% were couples without children, and 30.4% were couples with children.

About a month after they received the questionnaire, the responding households that consisted of couples with or without children were asked in a letter if they would like to participate in a telephone interview. They were requested to return a prepaid envelope with a response form in which they provided their telephone number, Participants received SEK 50 (approximately US$6) for their participation.

Of the total of 263 invited households, 109 (4 1.4%) participated in the interview. Of these households, 42.3% had children living with them, while 57.7% did not. The average monthly disposable income was SEK 23,263 (= US$3,000) (SD = 7,757 [US$1,021]). Of the members of the household that responded, 50.5% were women and 49.5% were men. The mean age was 46.4 years (SD =

l5.0), with an age range from 22 to 75 years.

Materials and Procedure

In the mail-back questionnaire, participants were asked to state their household’s monthly disposable income. They also were asked to state their disposable assets (including savings, stocks, and bonds) on predefined intervals

SOCIAL COMPARISON AND CONSUMER BEHAVIOR 121 1

ranging from SEK 10,000 (= US$1,316) or less to more than SEK 900,000 (= US$118,421). Questions were asked also about the number of persons and the number and age of children in the household. These questions were used to com- pute the number of consumption units for the household, which is a measure reflecting the need for consumption (Fritzell, 2001). For the first adult in a household, the number of consumption units is 1.16, and then a number is added for each household member (depending on age). For the second adult, the number of consumption units is 0.76, for children between 0 and 3 years it is 0.56, for children between 4 and 10 years it is 0.66, for children between l l and 17 years it is 0.76, and for children and other persons over 18 years it is 0.96. The measure of current income was divided by the number of consumption units in the household to adjust for differences in need for consumption depending on the number of household members and the ages of the children.

Participants were asked also to compare their economic situation with that of other households. The comparision was indicated on a 5-point scale ranging from 1 (much worse) to 5 (much better). On five separate rating scales, participants were asked to compare themselves to unspecified others, relatives, acquaintances, neighbors, and the Swedish population.

A trained female research assistant conducted the telephone interviews. After an introduction, she asked respondents to answer “Yes” or “No” to the question about whether during the last year they had bought any of the durable goods on a list. The list included TV, VCR, VCR camera, camera, vacuum cleaner, micro- wave oven, dishwasher, washing machine, bedroom furniture, dining-room hmiture, and living-room furniture. If they had bought several of the items, they were asked to state which one was purchased most recently. If they had not bought any of the items, they were asked to state whether they had bought any other durable goods during the last year at a price exceeding SEK 2,000 (= US$263). If they also answered “No” to this question, they were asked which of the durable goods in the list they had purchased most recently and when they made the purchase.

After identifying the most recent purchase made by the household, subsequent questions concerned this specific purchase. Open-ended questions also were posed about when and where the purchase was made, the price, and the make and model of the purchased item. A number of additional questions were asked about the purchase, but in the following we only describe the questions relevant to the present study.

To assess the impact the purchase had on their economy, participants were asked to indicate how it affected their economy by rating the accuracy of three statements on a 5-point scale ranging from 1 (not accurate at all) to 5 (completely accurate). These statements were “We did not need to think about it,” “We cut down on expenses beforehand to be able to buy X,” and “We had to cut down on expenses afterward due to the purchase of X.”


To obtain a measure of the degree to which participants carefully planned the purchase, they were first asked whether they “purchased X immediately when seeing it,” “thought about it for a few days,” “thought about it for 1 to 2 weeks,” or “thought about it for more than 2 weeks.” Second, participants were asked how they informed themselves about the durable good before the purchase. Responses were given in an open-ended format, which the interviewer identified with any of several designated sources of the information. This will be referred to as free information search. Third, the interviewer read aloud these different information sources and the respondents answered “Yes” or “NO” on whether they had consulted them. This will be referred to as supported information search. The alternatives were “read brochures,” “read ads,” “asked a consumer adviser,” “read product information,” “took part of test results,” “asked in shops,” “asked friends,” and “searched the Internet.” Finally, participants were asked how carefully they had planned the purchase, indicating this on a 5- point scale ranging from 1 (not at all carefullyplanned) to 5 (very carefully planned).

Two questions were asked to determine how important the households perceived the purchase for their well-being. First, they were asked to indicate how necessary they perceived the purchase for their household on a 5-point scale ranging from 1 (not necessary at all) to 5 (completely necessary). Second, they were asked to indicate to what extent they considered the purchase to be important for their satisfaction with their standard of living. They rated this on a 5- point scale ranging from 1 (ofno importance) to 5 (ofgreat importance).

After the questions about a purchase they had made, participants were asked about items they had considered purchasing but had refrained from doing so. For each durable good in the list, they were asked to answer “Yes” or “No” to the question of whether they had refrained from buying it.

The last questions in the interview concerned grocery shopping. First, participants were asked whether they usually made major purchases of groceries in discount stores, supermarkets, food stores, or convenience stores. They were asked to indicate approximately how much money they spent the last time they made a major purchase of groceries. Then they were asked to indicate on a 4-point scale ranging from 1 (never) to 4 (always) how often they did the following when they made major purchases of groceries (in the order of appear- ance): “Do you write a shopping list?”; “When you do a shopping list, do you purchase more than what’s on the list?’; “Do you buy big packs of groceries?”; “Do you shop for low-price offers?”; “Do you read information on price comparisons?’; and “Do you make calculations of the total costs before you do the purchase?”

The interviews took about 10 to 15 min to complete. Participants were then debriefed and thanked for their participation. About a week after their participation, the participants received their monetary compensation in the mail.

SOCIAL COMPARISON AND CONSUMER BEHAVIOR 121 3

Table 1

Product-Moment Correlations and Means,for Social Comparisons With Different Reference Groups

Reference group n M SD 1 2 3 4

1. Others 390 2.99 1.04 -

2. Relatives 377 2.76 1.21 .57** -

3 . Acquaintances 369 2.94 0.95 .76** .44** -

4. Neighbors 360 3.04 0.91 .54** .47** .52** -

5. Swedishpopulation 360 3.09 1.11 .59** .55** .49** .53**

**p < .01

Results

Measures

In the subsequent analyses, we distinguish three groups of households that differ with respect to how they evaluate their economic situation compared with others. The classification of the households was based on the comparisons made with unspecified other households.

As can be seen in Table 1, in the survey data for the sample from which the interviewees were obtained, all social comparisons are significantly and fairly highly correlated. The highest correlations were found for the comparison with unspecified others. Hence, using this comparison as the basis for the classification will not differ much from using the other comparisons. The households that stated their economic situation is much worse or a little worse compared to others constitute one group (i.e., the worse group; n = 27). The households that stated their economic situation is not different from the households with which they compare themselves form another group (ie., the no-difference group; n = 42). The households that stated their economic situation is a little better or much better compared to others constitute the third group (i.e., the better group; n = 39).

The measure of consumption is the number of purchases of listed durable goods during the last year. Since the distribution of this measure was skewed, it was recoded to 0 (no purchase), 1 (one purchase), 2 (two purchases), or 3 (three or morepurchases). The same recoding was made of the number of refrained purchases, which thus included 0 (no refrained purchases), 1 (one refrained purchase), 2 (two refrained purchases), and 3 (three or more refrained purchases).


The measures of the purchase’s impact on the economy, the degree of careful planning, and the importance of the purchase for the household’s well-being all had poor to moderate reliability. Cronbach’s alphas for the three measures were S2 , .68, and .49, respectively. However, since the questions used for the different measures were included to capture different aspects, high internal consistency is not crucial.

Each of the three measures is constructed by computing the mean of the questions included to measure each construct. Furthermore, in the following analyses, the results also will be presented for all the questions included in each measure. Since some of the participants had made very expensive purchases and some had made very cheap purchases, in these analyses only the participants were included who had made purchases at a price ranging between SEK 1,000 (= US$132) and SEK 30,000 (= US$3,947). This reduced the number of participants to 89.

The measure of the degree to which the households economize their grocery shopping was found to have a Cronbach’s alpha of .77. This measure was formed by computing the mean of the different questions included. Two of the items were reverse coded so that the measure ranged from 1 (low degree of economizing) to 4 (high degree of economizing).

Pwchuse of Durable Goods

In all subsequent analyses, income, disposable assets, and social comparisons are included. As in Karlsson et al. (2004), there was a positive correlation between income and social comparison ( r = .29, p < . O l ) ; that is, the better a household’s income, the better they consider their economic situation to be in comparison with others. However, in the analyses, the effects of social comparison are assessed, controlling for the effects of income and disposable assets by means of ANCOVAs.

In Table 2, it can be seen that households that regarded themselves as worse off than others made fewer purchases than did those that regarded themselves as neither worse off nor better off than others. It can be seen especially that those that regarded themselves as better off than others made more purchases. In line with Hypothesis 1 and controlling for income and disposable assets, households that regarded their economic situation as better than others’ made more purchases than did households that regarded themselves as worse off than others.

Since it may be assumed that the dependent variable is ordinal, an ordered probit regression analysis was conducted. According to this analysis, the effect of social comparison was significant, I( 108) = 2.25, p < .05. Neither income nor disposable assets had a significant effect on the number of purchases.

Also displayed in Table 2, households that saw themselves as better off than others refrained from fewer purchases than did the other households. However, according to another ordered probit regression analysis, the effect of social


Table 2

Number of Purchases and Refrained Purchases for Different Social Comparison Groups

Household’s economic situation compared to others

Worse off No difference Better off

Number of purchases 0 11 (40.7%) 13 (31.0%) 4 (10.3%) 1 8 (29.6%) 12 (28.6%) 14 (35.9%) 2 3 (11.1%) 7 (16.7%) 10 (25.6%) 3 or more 5 (18.5%) 10 (23.8%) 11 (28.2%)

0 13 (48.1%) 19 (45.2%) 21 (55.3%) 1 2 (7.4%) 15 (35.7%) 9 (23.7%) 2 4 (14.8%) 4 (9.5%) 3 (7.9%) 3 or more 8 (29.6%) 4 (9.5%) 5 (13.2%)

Number of refrained purchases

Note. Relative frequency is reported in parentheses.

comparison was not significant. The analysis further reveals that the effect of income was not significant, whereas the effect of disposable assets was close to significant, (108) = 1.87, p < .lo. The larger the amount of assets, the less the households refrained from purchases. Hence, no support was obtained for Hypothesis 2, stating that social comparison of the economic situation would have an effect on refraining from consumption when controlling for income and disposable assets.

Table 3 provides the adjusted means for perceived impact on the economy of the latest purchase, the degree to which it was carefully planned, and its importance for well-being, depending on the view of one’s own economic situation compared with others. As can be seen in the table, the households that regarded themselves as worse off than others considered the purchase to have a greater impact on their economy than did the other households.

The same general pattern of results held for all three questions included in the index measure. In line with Hypothesis 3, the ANCOVA with social comparison as a fixed factor and income and disposable assets as covariates yielded a significant effect of social comparison, F(2, 83) = 4.60, p < .05. Neither the effect of income nor the effect of disposable assets was significant. Bonferroni-corrected t


Table 3

Means of Perceived Impact oj’a Targeted Purchase on Household j . Economy, Degree of Planning of Purchase, and Importance of Purchase for Well-Being Related to Social Comparison Groups

Household’s economic situation compared to others

Worse off No difference Better off (n = 22) ( n = 33) (n = 34)

Impact on economya I .78 1.23 1.38 Need not think about it 3.52 4.54 4.33 Cut down on expenses before 1.38 1.17 1.21 Cut down on expenses after 1.49 1.06 1.27

Degree of careful planningb 2.75 2.37 2.03 Delay of purchase 2.77 2.49 2.29 Free information searched 0.82 0.54 0.36 Supported information searched 3.19 2.24 1.59 Careful planning 4.22 4.2 1 3.90

Necessity of purchase 4.14 3.81 3.68 Impact on standard of living 3.26 2.99 3.10

Importance of purchase” 3.70 3.40 3.39

Note. Means are adjusted for differences in income and disposable assets. aImpact on economy = mean of “Need not think about it” (reverse scored), “Cut down on expenses before,” and “Cut down on expenses after.” bDegree of careful planning = mean of “Delay of purchase,” “Free information searched,” “Supported information searched,” and “Careful planning.” Clmportance of purchase = mean of “Necessity of purchase” and “Impact on standard of living.”

tests at a familywise alpha level of .05 reveal that only the households consider- ing themselves worse off than others differed significantly from the no-difference group.

Table 3 also shows that households that saw their economic situation as worse off than others planned the purchase more carefully, whereas households that saw their economic situation as better off than others planned the purchase less carefully, as compared to households that did not see their economic situation as different from the households with which they compared themselves. The same pattern of results was found for all the questions included in the measure of


degree of careful planning. In the ANCOVA on the degree of careful planning with social comparison as a fixed factor and income and disposable assets as covariates, the effect of social comparison was significant, F(2, 84) = 4.63, p < .05. Neither of the effects of income or disposable assets was significant. Hence, support was obtained for Hypothesis 4. In Bonferroni-corrected t tests at a familywise alpha level of .05, it was found that only the difference between households seeing themselves as worse off than others and better off than others reached significance.

Finally, as can be seen in Table 3, the households that considered their economic situation to be worse than that of others perceived the purchase to be more important for their well-being than did the other households. However, this effect was not significant in the ANCOVA on the importance of the purchase with social comparison as a fixed factor and income and disposable assets as covariates. Furthermore, there were no significant effects of income and disposable assets. Thus, no support was obtained for Hypothesis 5 stating that social comparison would have an effect on the importance of a purchase for well-being when controlling for income and disposable assets. Even if the group of households that saw themselves as worse off economically than others seemed to view the purchase as more necessary and to have a larger impact on their standard of living, none of these effects reached significance in ANCOVAs on each separate question.

Taken together, the results demonstrate that social comparison influences decisions to purchase durable goods. When controlling for income and disposable assets, social comparison had a significant effect on the number of purchases (Hypothesis l), the purchase’s perceived impact on the household’s economy (Hypothesis 3), and the degree of care in planning the purchase (Hypothesis 4). Although they were in the expected direction, the effects of social comparison on the number of refrained purchases (Hypothesis 2) and the perceived importance of the purchase for the household’s well-being (Hypothesis 5) did not reach significance. Income and disposable assets had no significant effects on any of the dependent variables. Hence, the results are in line with the general hypothesis that the view of one’s own economic situation in comparison with others has a greater impact on purchase decisions of durable goods than do the household’s current income and disposable assets.

Purchase of Groceries

According to Hypothesis 6, we expected that the view of the households’ economic situation in comparison with others would have less impact on purchases of groceries than would their income. In Table 4, correlations and F values are presented for the effects of social comparison, income, and disposable assets on the index measure of economizing purchases of groceries, as well as on the

121 8 KARLSSON ET AL.

Table 4

Product-Moment Correlations and F ValueOs for Effects of Social Comparison, income, and Disposable Assets on Aspects of Purchases of Groceries

Social Disposable

r F r F r F

comparison Income assets

Economizing in purchases -.34** 1.21 -.43** 18.50** -.33** 3.76 Size ofpurchase -.19 0.59 -.24* 2.25 -.24* 1.76 Size of store -.20* 0.05 -.36** 7.04** -.32* 3.98* Use of shopping list -.25** 1.22 -.20* 7.13** -.13 0.04 Hold on to shopping

list -.07 0.22 -.25* 3.28 -.13 0.13 Economy pack -.09 1.57 -.26** 8.20** -.30* 6.79** Low-price offers -.24* 1.18 -.32** 8.95** -.08 0.01 Look at price

Calculate total costs comparisons -.23* 0.38 -.28** 7.22** -.14 0.21

before -.33** 3.33** -.36** 4.35* -.32** 5.48**

Note. The F values for social comparison are from ANCOVAs controlling for income and disposable assets. Economizing in purchases is the mean of all of the other variables listed on the lefthand side of the table. *p < .05. **p < .01.

separate items included in this measure. The F values are computed from separate ANCOVAs, with social comparison as a fixed factor and income and disposable assets as covariates.

As can be seen in Table 4, correlations with the different aspects of grocery shopping are generally greater for income than for social comparison. The nega- tive sign of the correlations indicates that with a higher income, the households economized to a lesser extent in their grocery shopping. Furthermore, in the separate ANCOVAs, the effects on the different aspects of grocery shopping were, in most cases, significant for income, while not for social comparison. The only nonsignificant effects of income were on size of purchases (i.e., how often and how much purchased each time) and on the extent to which respondents bought only the things written on a shopping list. The only significant effect of social comparison was for the extent to which the households calculated total costs


before the purchase. Hence, these results taken together support the hypothesis that income is more important than social comparisons for purchases of groceries.

Discussion

Our main goal in the present research was to shed light on how households’ comparisons of their economic situation with others affect purchase decisions. When households make purchase decisions, an important aspect concerns whether or not they think they can afford the purchase. To determine whether one can afford a purchase, we assume that social comparison of the economic situation sometimes is more important than the household’s actual economic situation in terms of current income and disposable assets. The results supported the overall hypothesis that the households’ view of their economic situation as worse or better than that of others would be more influential than income and disposable assets for purchase decisions of durable goods. For the purchase of groceries, however, income was, as expected, more important than social comparison of the economic situation. This difference in the impact of social comparison for purchases of durable goods and groceries is understandable, given that the uncertainty of whether or not one can afford a purchase is more likely to be felt for durable goods that are bought more irregularly and seldom than for groceries that are purchased on a more regular basis.

The support obtained for that households’ social comparisons of the economic situation have an effect on purchase decisions focused on differences between households. There also may be effects of differences in social comparison of the economic situation within households over time. For instance, households may make different social comparisons when deciding to purchase something than when they decide to refrain from a purchase. That is, before and after a purchase, households may motivate the purchase by doing downward comparison, thinking that they can afford it since there are many who are worse off economically than they are who can afford it. When refraining from a purchase, or in order to refrain from a purchase, households may tend to do upward comparison, telling themselves that other households can afford to buy an item such as this because they are better off economically.

We know from a previous study (Karlsson et al., 2004) that a household’s actual economic situation is an important determinant of how households evaluate their economic situation compared with others. In the present study, we controlled for the influence of the household’s actual economic situation, finding that social Comparison seemed to be even more important for purchase decisions of durable goods than the actual economic situation. It is possible, however, that households feel richer or poorer than others depending on the number of durable goods purchased. That is, purchase decisions may determine the social comparison of the


economic situation, rather than the other way around, as we suggest. However, the households stated how they perceived their economic situation in comparison with others about a month before they answered the questions about their latest purchase decisions. Hence, although we cannot conclusively rule out this reverse causal direction between social comparison and purchase decisions, we find it more likely that the social comparison stated a month earlier affected, for instance, the perceived impact of a purchase on the economy or degree of careful planning than the other way around.

As mentioned earlier, it could be the case that social comparison of the economic situation affected purchase decisions through changes in desire to make a purchase, rather than being a cue to whether or not the household can afford a purchase. In addition to the counterarguments already given, the results speak further against this alternative interpretation. Social comparison had an effect on the degree to which households thought that the purchase had an impact on their economy, which is related to their ability; but it had no effect on the perceived importance and necessity of the purchase, which is related to their desires.

A limitation of the present study is that we asked only one member of the household to answer questions about the household, which makes the answers less representative than if more or all members of the households would have been queried. Another limitation is that there are conflicts of interests within the household that are important for purchase decisions and that we are not able to capture with our procedure. Still, without denying their importance, we do not see how any of these issues would give rise to alternative interpretations of the support we obtained for our hypotheses.

Social comparison has been proven previously to be important for consumer behavior. People may buy what other people are buying to know that they buy things that are worth buying or to gain acceptance. People also may buy what is very expensive in order to signal wealth, or buy what no one else is buying in order to signal a refined taste. These effects have been referred to as the bandwagon effect, the Eblen effect, and the snob effect (Leibenstein, 1950). What we focused on in the present study is that social comparison of the economic situation may have an impact on purchase decisions of durable goods. We are not aware of any previous empirical demonstrations of the effect of social comparison of the economic situation on purchase decisions. Hence, the fact that social comparison of the economic situation influenced purchase decisions adds to the previous literature and further emphasizes the importance of social comparison in consumer behavior.

Since part of the problem with indebtedness and economic difficulties stems from excessive consumption, people may need to learn or to pay more attention to the fact that their own economic situation is more important in whether or not they can afford a purchase than what the situation is relative to others. Moreover, policymakers tend to focus on the relationship between income and welfare.


Households do not simply derive welfare or well-being from their incomes from the labor and welfare benefits. How they use their incomes for consumption is an important part of the generation of welfare. In the present study, it was shown that for certain types of consumption, social comparison was more important than actual income. Hence, to better understand how income generates welfare, one should learn more about what determines purchase decisions. The present study is one such attempt.

References

Aronson, E. (1994). The social animal (7th ed.). New York, NY W. H. Freeman. Comeo, G, & Jeanne, 0. (1997). Conspicuous consumption, snobbism, and con-

formism. Journal of Public Economics, 66, 55-71. Deaton, A. (1997). The analysis of household surveys: A microeconometric

approach to development policy. Baltimore, MD: Johns Hopkins University Press.

Dellgran, P., & Karlsson, N. (2001). Konsumtionsmonster och valfirrd under 1990- talet [Consumption patterns and welfare during the 1990~1. In J. Fritzell & J. Palme (Eds.), Va~ardensfinansiering och fordelning, SOU 2001:57 (Antologi frAn Kommittkn Viilfardsbokslut, pp. 189-250). Stockholm, Sweden: Fritzes.

Deutsch, M., & Gerard, H. B. (1955). A study of normative and informational social influences upon individual judgment. Journal of Abnormal and Social

Festinger, L. (1954). A theory of social comparison processes. Human Relations,

Fritzell, J. (2001 ). Inkomstfordelningens trender under 1990-talet [Income distribution trends in the 1990~1. In J. Fritzell & J. Palme (Eds.), Vu/iilfiirdens Jinansiering och fordelning, SOU 2001:57 (Antologi f r h Kommitten Valflirdsbokslut, pp. 13 1-1 87). Stockholm, Sweden: Fritzes.

Hagerty, M. R. (2000). Social comparisons of income in one’s community: Evi- dence from national surveys of income and happiness. Journal of Personality and Social Psychology, 78,764-77 1.

Heath, C., & Soll, J. B. ( 1 996). Mental budgeting and consumer decisions. Jour- nal of Consumer Research, 23,40-52.

Karlsson, N., GZirling, T., & Selart, M. (1999). Explanations of effects of prior income changes on buying decisions. Journal of Economic Psychology, 20, 449-463.

Karlsson, N., Dellgran, P., Klingander, B., & Garling, T. (2004). Household consumption: Influences of aspiration level, social comparison, and money man- agement. Journal of Economic Psychology, 25,753-769.

Leibenstein, H. (1950). Bandwagon, snob, and Veblen effects in the theory of consumers’ demand. Quarterly Journal of Economics, 64, 183-207.

PsyChOloa, 51,629-636.

7, 117-140.


Martin, R. (2000). Can I do X? Using the proxy comparison model to predict per- formance. In J. Suls & L. Wheeler (Eds.), Handbook of social comparison: Theory and research (pp. 67-80). New York, NY: Kluwer Academic.

Miller, D. T., & Prentice, D. A. (1996). The construction of norms and standards. In E. T. Higgins & A. W. Kruglanski (Eds.), Socialpsychology: Handbook of basic principles (pp. 799-829). New York, NY: Guilford.

Modigliani, F., & Brumberg, R. (1954). Utility analysis and the consumption function: An interpretation of cross-section data. In K. K. Kurihara (Ed.), Post-Keynesian economics (pp. 388-436). New Brunswick, NJ: Rutgers Uni- versity Press.

Shefiin, H. M., & Thaler, R. H. (1988). The behavioral life-cycle hypothesis. Economic Inquiry, 26,609-643.

Suls, J., & Wheeler, L. (2000). A selective history of classic and neo-social comparison theory. In J. Suls & L. Wheeler (Eds.), Handbook of social comparison: Theory and research (pp. 3-19). New York, N Y Kluwer Academic.

Taylor, S . , & Brown, J. ( 1 988). Illusion and well-being: A social-psychology per- spective on mental health. Psychological Bulletin, 103, 193-2 10.

Wheeler, L., Martin, R., & Suls, J. (1997). The proxy model of social comparison for self-assessment of ability. Personality and Social Psychology Review, 1, 54-6 1 .

Documents

Social Comparison and Consumer Behavior: When Feeling Richer or Poorer Than Others Is More Important Than Being So