were willing to be charged Rp 10,000 (approximately US$ 1) to receive a formal offer once the card was launched. In practice, all customers who indicated that they would sign up for the card agreed to to pay this fee, suggesting the stated preference was not simply cheap talk.

# **5.3 Testable Predictions**

If demand for the status aspect of the cards arises from income signaling motives, informing customers that individuals with lower income can now access the platinum card will weaken the associated income signal, reducing demand for the platinum card relative to the diamond card (holding instrumental benefits fixed).

In terms of our theoretical framework, with social signaling utility _S_ , this can be expressed as follows. Let the social image or income signal associated with ownership of the diamond card be denoted _S_<sup>_diamond_</sup> (1). The perceived social image associated with the platinum card will depend upon whether customers are informed about the reduced income threshold or not, denoted as _Sinfo_<sup>_platinum_</sup> (1) and _Sno_<sup>_platinum_</sup> _−info_<sup>(1),whereweassumeittobepublicknowledgethatthediamondcard</sup> is associated with a higher income criterion than the platinum card.

Since the instrumental benefits _b_ are explicitly held equal across the platinum and diamond card offers, the decision of an existing platinum cardholder to take up the diamond card will simply depend upon whether the perceived gain in social image exceeds the difference in price: customers who are informed about the changes in the eligibility criteria will take up if _S_<sup>_diamond_</sup> (1) _− Sinfo_<sup>_platinum_</sup> (1) _> p_ while customers who are not informed about these changes will take up if _S_<sup>_diamond_</sup> (1) _− Sno_<sup>_platinum_</sup> _info_<sup>(1)</sup><sup>_> p_.Positionalexternalitiesduetoincomesignalingmotivationsimply</sup> that _Sinfo_<sup>_platinum_</sup> (1) _< Sno_<sup>_platinum_</sup> _info_<sup>(1).Thatis,inthepresenceofpositionalexternalities,thesocial</sup> image associated with the card is reduced when lower-income individuals have access to the card, which leads to the following testable prediction.<sup>31</sup>

**Prediction 3.** _If positional externalities are present and the platinum credit card is a status good, the share of customers demanding an upgrade to the diamond card will be higher in the treatment group, where customers are informed that the income eligibility criterion for the platinum card has been reduced, than in the control group where no such information is provided._

# **5.4 Results: Positional Externality**

We begin by comparing raw take-up rates of the control and treatment groups from the positional externalities experiment in Figure 6. Demand for the diamond card increases by almost 19 percentage points, from 21.5% to 40% (p-value=0.069), when customers are informed that the platinum card is now available to a larger group of customers. Table 1, column (1) reports the corresponding

> 31For simplicity, we neglect the case where the customer would prefer to cancel the platinum card, due to its lower income signal, but would not consider it worthwhile to obtain the more expensive diamond card.

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