_Status-signaling in credit card transactions._ Next, we analyze individual credit card transactions among a larger observational sample of customers to understand how the platinum card is used in practice, and whether this is consistent with social image motives. Exploiting the bank’s assignment rules for credit limits and card types, we show that platinum card holders are more likely to use the card in social situations, such as spending in restaurants, bars and clubs, where the card is likely to be visible to others. This likely reflects platinum card holders substituting away from using other cards or cash for such expenditures, since a consumption recall survey reveals that actual restaurant visits do not differ between platinum and standard card holders. Moreover, the use of the platinum card for social signaling is in fact costly: while the card used in our study does not offer cash back rewards, at least 48% of platinum customers report owning other credit cards which _do_ offer cash back at restaurants and similar transactions.<sup>8</sup> Hence, the customers in our data forgo money in the form of cash back rewards each time they use the platinum card instead of other cards they may own to pay at a restaurant or bar. Taken together, these findings are consistent with the hypothesis that platinum cards are used to build social image.<sup>9</sup> _Valuation of social status._ We can combine the results of the first experiment with the transaction data to shed light on how much consumers value social status in their social interactions. First, a simple calibration exercise utilizing the price variation from the first experiment suggests that consumers _value_ the status aspect of the card by 218,000 Rupiah ($15.5) per year on average. Next, we note that the average user uses the card 4.8 times per year in social or visible situations. Suppose that the ‘audience’ infers that the card owner has the average annual income associated with the card: Rp. 522 million for platinum cards, and Rp. 215 million for gold cards, a difference of approximately Rp. 300 million. This implies that consumers, on average, value being seen as having Rp. 300 million higher income by Rp. 218,000/4.8 – approximately $3.2 – per interaction. While this back-of-the-envelope calculation depends on a number of assumptions, if consumers do value income signaling similarly in their other social interactions, the total value of status could be much higher. Products that could convey status to a larger audience (unlike a credit card) might thus command a substantial premium.

_Positional externalities._ Having established that status considerations play a substantial role in the demand and use of platinum credit cards, we turn to testing for ‘positional externalities’ imposed by ownership of the cards (Frank, 2005). In a control group, current platinum card holders are offered an upgrade to a new, more-expensive but functionally identical, ‘diamond card’. In the treatment group, customers receive the same offer, but are additionally informed that the income criterion for their existing platinum card – but not the new diamond card – has been recently

> 8Only 39% of non-platinum cardholders have other cards with such deals.

> 9Note that we cannot separate whether the greater use of the platinum card in social settings is a causal effect of the card, or whether those who care more about social image select differentially into the platinum card. We discuss this point in more detail in Section 4.

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