01 Feb 2010  Research & Ideas

The ‘Luxury Prime’: How Luxury Changes People

What effect does luxury have on human cognition and decision making? According to new research, there seems to be a link between luxury and self interest, an insight that may help curb corporate excesses. Roy Y.J. Chua of Harvard Business School discusses findings from his work conducted with Xi Zou of London Business School. Key concepts include:

  • People who were made to think about luxury before a decision-making task were more likely to endorse self-interested decisions that might potentially harm others.
  • Although luxury does not necessarily induce people to harm others, it may cause them to be less considerate.
  • Limiting corporate excesses and luxuries might be a step toward getting executives to behave more responsibly toward society.

 

Are people who travel in town cars and on corporate jets different—on a psychological level—from you and me? Does the availability of luxury goods "prime" individuals to be less concerned about or considerate toward others? The answer from new research seems to be yes.

HBS professor Roy Y.J. Chua and Xi Zou, an assistant professor at London Business School, suggest that luxury goods have an important effect on human behavior that is only now becoming clear—and that may have implications for addressing the continuation of objectionable choices among, for example, high-flying executives on Wall Street.

According to Chua, their research found that "people who were made to think about luxury prior to a decision-making task have a higher tendency to endorse self-interested decisions that might potentially harm others." Their findings are detailed in the HBS working paper "The Devil Wears Prada? Effects of Exposure to Luxury Goods on Cognition and Decision Making" [PDF].

"Will the same business meeting reach different decisions when it is held at a luxury resort as opposed to a modest conference room?" the authors write. "Will CEOs who bequeath themselves expensive office facilities and luxurious corporate jets make different business decisions than those who do not? In this age of Wall Street excesses, these are pertinent questions that could further our understanding of why some [people] continue to place their own interests over others', even in difficult economic times."

Chua, whose research draws on human psychology to better understand important social processes in business organizations, explained more about the findings in an e-mail Q&A.

Sarah Jane Gilbert: You conducted two experiments to explore a psychological link between the notion of luxury and self-interest. What did you find?

Roy Chua: In the first experiment, participants were asked to answer a series of business-related decision-making questions that were designed to tap the extent to which people place self-interests (profit maximization for one's firm) above society interests. An example involved asking participants how likely they are to endorse the manufacturing of a new model of car that could bring in enormous profit but could potentially pollute the environment. Before answering these questions, half of the participants were asked to evaluate luxury products, while the other half evaluated cheaper equivalents. We found that people who were made to think about luxury prior to the decision-making task have a higher tendency to endorse self-interested decisions that might potentially harm others.

These results led us to wonder whether "luxury-primed" individuals are simply self-interested or are indeed more prone to harm others. Thus, we conducted a second experiment that was similar to the first one in that the participants were either primed with luxury or not. The difference is that after the prime, we asked them to do a word recognition exercise. The task was to write down the first word that came to their mind when given a string of scrambled letters. These strings of scrambled letters were each constructed by interleaving a pro-social word with an anti-social word of equal length. Examples of the pro-social words used were nice, giving, and helpful; examples of anti-social words were rude, stingy, and selfish. We found that luxury-primed participants identified significantly fewer pro-social words than non-luxury-primed participants. However, there was no significant difference in the identification of anti-social words.

This pattern of findings suggests that luxury-primed individuals were not more likely to have anti-social cognition, but were less likely to have pro-social thoughts. In other words, when thinking about luxury, people tend to focus more on themselves and less on others.

Q: Did anything in your research surprise you?

A: The findings are not so much surprising as illuminating. We expected a relationship between luxury and self-interests. However, self-interested behaviors are often conflated with those that do harm to others (e.g., selling low-quality products that might be harmful to consumers). Our second study to some extent clarifies the psychological dynamics that arise from luxury.

Luxury does not necessarily induce one to do harm to others, but simply causes one to be less concerned or considerate toward them.

Q: How do your findings help us to understand corporate greed? Do you think there is a different mindset now for companies and executives to change and become more socially and morally responsible?

A: In the midst of the current global economic crisis, people are outraged by highly paid executives living in the lap of luxury while continuing to make self-serving decisions and ignoring the plight of others. To date, more than a year since the crisis started, despite much public outrage and threats to more strongly regulate the financial industry, there do not seem to be any substantive changes in their mindset. Bankers are still planning large bonuses for themselves.

One commonly proffered explanation is that these executives lack a moral compass, leading them to care only about themselves to the extent of hurting others. Our findings offer another perspective—the fact that these executives are surrounded by luxury did not help their decision-making to be more "other-oriented." Yet their seemingly "immoral" decisions stem not so much from a real desire to hurt others but more from over self-indulgence.

Perhaps besides limiting the size of bonuses, limiting corporate excesses and luxuries might be a step toward getting executives to behave more responsibly.

Q: Since your research is work in progress, do you have plans to expand your study to uncover additional findings? What would you include in future studies?

A: Yes, this is still very much work in progress. While our findings established the effects of exposure to luxury, we believe more work is required. Future research should tease out the nuances in the psychological effects of "luxury prime" (which we have shown to promote self-interest) and "money prime" (which has been shown to promote self-sufficiency and independence).

Toward this end, Xi Zou and I have recently completed a new study in which participants tested perfumes as part of an ostensible marketing research project. Participants were divided into two groups: In the first group, participants read about perfumes as luxury products, and in the second group, participants read about perfumes as becoming daily necessities. Both groups tested the same perfumes. We found that luxury-primed participants behaved in a more self-interested manner in that they were less likely to make contributions toward the public good. Priming luxury did not have any effect on self-sufficiency measures, suggesting that priming luxury is different from priming money.

Future research should also examine the mechanisms through which luxury goods activate self-interests. We posit that several potential mechanisms may be involved in the process. Exposure to luxury goods may activate a social norm that it is appropriate to pursue interests beyond a basic comfort level, even at the expense of others. It may be this activated social norm affects people's judgment and decision-making. Alternatively, exposure to luxury may directly increase people's personal desire, causing them to focus on their own benefits such as prioritizing profits over social responsibilities.

Although these two mechanisms lead to the same observed results, they have distinct social implications. As social scientists, we think it is important to understand the "why" beneath the effects we found, and so we are currently planning more studies.

About the author

Sarah Jane Gilbert is a product manager for Harvard Business School's Knowledge and Library Services.