million credit limit). There is no significant change in the share of online transactions (Table 2, column 3), and a significant decrease in the proportion of retail transactions (Table 2, column 5).

In contrast, there is no significant difference in the shares of visible, online and retail transactions between customers with Rp 30 versus Rp 20 million credit limits (both gold card holders) and between customers with Rp 50 versus Rp 40 million credit limit (both platinum card holders). These results suggest that the difference in consumption patterns between customers with Rp 40 million and Rp 30 million credit limit is not simply related to a credit limit increase.<sup>27</sup> The same pattern remains once we control for customers’ observable characteristics, such as income, age, gender, and religion (Table 2, columns 2, 4, and 6).<sup>28</sup>

# **4.2.2 Interpretation: A Costly Signal**

_Changes in consumption versus changes in modes of payment._ Do these changes reflect actual differences in consumption, or customers switching to using the platinum card instead of using cash or other credit cards? Note that both possibilities are consistent with the use of the card for status-seeking behavior. To shed light on this question, we conduct a retrospective consumption survey with 362 customers randomly drawn from this sample, and find only a small (and statistically insignificant) increase in the number of restaurant meals in the last month. Owning a platinum card thus does not actually make customers go to restaurants more. Nor do platinum card owners appear to be differentially selected for their interest in restaurant visits. Yet, they pay quite differently for these restaurant expenditures. Is this costly signaling behavior, or are there other reasons to use platinum cards in restaurants over other means of payment?

_Opportunity cost of card usage._ The platinum card we study offers discounts on some luxury brands like Armani and Gucci, but does not offer cash back or discounts in restaurants. The increase in the share of visible transactions is thus not driven by simple price effects. In fact, a survey with these customers reveals that 48% of platinum customers with the Rp 40 million credit limit own other credit cards that _do_ offer cash back.<sup>29</sup> Platinum card holders therefore appear willing to pay a cost to show off their platinum cards, forgoing cash back from other cards.

Note that we cannot claim to have identified the _causal_ effect of owning a platinum card on

> 27The p-value of a test that the difference in the share of visible transactions for customers with credit limits of Rp 40 million and Rp 30 million is the same as that between customers with Rp 30 million and Rp 20 million is less than 0.01. The p-value of a test that the difference in the share of visible transactions between customers with Rp 40 million and 30 million credit limit is the same as that for customers with Rp 50 million and Rp 40 million is 0.09.

> 28We also consider an alternative regression model in which we instrument platinum card with a dummy equals to one if credit limit is greater or equal to Rp 40 million and control for credit limit linearly. This model estimates the effect of holding a platinum card on consumption patterns controlling for the effect of credit limit, taking into account that a few customers with credit limit lower than Rp 40 million hold a platinum card. The coefficient for the dummy equal to one if credit limit is greater or equal to Rp 40 million in the first-stage regression is equal to 0.98. Results using this alternative model are also consistent with a change in consumption patterns for platinum card holders, as presented in Appendix Table A.4.

> 29This share is only 39% for gold customers with Rp 30 million credit limit (the p-value of the difference is 0.0676).

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