Expected Socioeconomic-Status-Based Discrimination Reduces Price Sensitivity Among the Poor

Low-socioeconomic-status (SES) consumers tend to be more price sensitive than their high-SES counterparts. Nonetheless, various economic-related burdens, such as mobility costs and lack of information, often hinder their ability to attend to scarcity-a phenomenon called ghetto tax. The current research moves a step further to show that even when very poor consumers can exert price sensitivity and are fully informed, a psychological ghetto tax often discourages them from doing so. Across five studies, the authors demonstrate that, relative to (1) high-SES consumers or (2) contexts of intragroup interaction, low-SES consumers are willing to pay higher prices and to accept lower-value rewards to avoid commercial settings that require intergroup interaction (e.g., poor consumers in a high-end shopping mall). This effect is driven by the poor consumers' heightened expectations of discrimination in upscale commercial settings, a concern virtually nonexistent among wealthy consumers. Companies' inclusion statements emphasizing customer equality and/or customer diversity can serve as safety cues against stigmatized identities and increase low-SES consumers' price sensitivity.

Automated summary

Low-socioeconomic-status consumers are more price sensitive than high-SES consumers, but a psychological ghetto tax often discourages them from expressing price sensitivity, even when they have the ability and information to do so. This effect is driven by poor consumers' concerns about discrimination in upscale commercial settings, which wealthy consumers do not experience.