Taken together, our findings provide the first field experimental evidence on status goods. We show that a desire to signal high social status, in isolation from instrumental utility or self-image considerations, can have a meaningful impact on consumption decisions. Moreover, the results from our second field experiment confirm an important prediction of these models, namely that the consumption of status goods creates a positional externality. Positional externalities can have important welfare effects by leading to wasteful consumption and inefficient innovation in the creation of status goods (Frank, 2005). By directly testing –and confirming– the key assumptions of status goods theories, our analysis suggests that the welfare and policy implications of these theories should be taken seriously. We view this causal evidence as supporting and complementary to the existing evidence from observational studies and natural experiments (Charles et al., 2009; Heffetz, 2011; Kuhn et al., 2011; Agarwal et al., 2016; Roth, 2014).

Using two entirely separate samples and products, we also show that higher self-esteem causally reduces demand for status goods. This evidence of substitution between self and social image may have implications beyond our setting. Factors lowering self-esteem –such as poverty, unemployment, or facing negative stereotypes– may magnify the effects of status-seeking behavior and increase susceptibility to social pressure more generally. Our finding might therefore shed light on related social phenomena, such as large wedding and festival expenditures by the poor in developing countries, and low-income, minority students conforming to harmful social norms at school.<sup>13</sup> The remainder of the paper proceeds as follows. In Section 2, we describe our setting. In Section 3, we present the first field experiment, which isolates the demand for the social status component of platinum credit cards. Section 4 presents the analysis of credit card transactions. In Section 5, we describe our second field experiment, establishing positional externalities. In Section 6, we present the final set of experiments, which examines the relationship between self-image and the demand for status goods. Section 7 concludes.

# **2 Setting: The Credit Card**

The market for credit cards in Indonesia has several features that make it an especially attractive setting to study status goods. First, Indonesia is an important emerging market economy with a large and rapidly growing middle class. Credit cards are widely used, and premium credit cards have a comparatively high income threshold relative to median income, making them a credible and well-recognized signal of status and economic success. Second, working with a bank, we are able to vary the instrumental benefits and services offered with a given credit card. This allows us to construct control products that vary specific features of the credit card in order to distinguish demand for the instrumental benefits of the card from demand due to signaling motivations. Third, we can link each card to its full transaction history, to understand whether the use of the cards in

> 13 See, for example, the “acting white” hypothesis, Austen-Smith and Fryer, 2005.

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