1. When vegetables are closer in price to chips, people eat healthier

    November 27, 2017 by Ashley

    From the Drexel University press release:

    When healthier food, like vegetables and dairy products, is pricier compared to unhealthy items, like salty snacks and sugary sweets, Americans are significantly less likely to have a high-quality diet, a new Drexel University study found.

    The research, led by David Kern, PhD, an adjunct faculty member at Drexel’s Dornsife School of Public Health, and Amy Auchincloss, PhD, an associate professor in the school, sought to find out the real effect that price difference has on the quality of diets in the United States.

    “We found that, on average, healthier perishable foods were nearly twice as expensive as unhealthy packaged foods: 60 cents vs. 31 cents per serving, respectively,” said Kern, lead author of the study in the International Journal of Environmental Research and Public Health. “As the gap between neighborhood prices of healthier and unhealthier foods got wider, study participants had lower odds of having a healthier diet.”

    For example, the study found that for every 14 percent increase in the healthy-to-unhealthy price ratio (the standard deviation in this study), the odds of having a healthy diet dropped by 24 percent. This was even after controlling for personal characteristics, like age, sex, income, education and other factors.

    “We are consuming way too many sugary foods like cookies, candies and pastries, and sugary drinks, like soda and fruit drinks,” Auchincloss said. “Nearly 40 percent of U.S. adults are obese and less than 20 percent attain recommendations for fruits and vegetables. Cheap prices of unhealthy foods relative to healthier foods may be contributing to obesity and low-quality diet.”

    To delve into price impacts, Kern and Auchincloss used cross-sectional data from 2,765 participants in the Multi-Ethnic Study of Atherosclerosis (MESA). Participants were recruited from six urban areas in the U.S.: New York, Chicago, St. Paul, Los Angeles, Baltimore and Winston-Salem in North Carolina. Each participant’s diet data was linked to food prices at supermarkets in their neighborhood.

    Grocery prices were broken down into categories of “healthier” and “unhealthy.” Healthier foods included:

    • Dairy products — milk, yogurt and cottage cheese
    • Fruits and vegetables — frozen vegetables and orange juice, since fresh produce prices were not attainable

    Meanwhile, among the unhealthy foods were:

    • Soda
    • Sweets — chocolate candy and cookies
    • Salty snacks — potato chips

    The researchers used the Healthy Eating Index-2010 (HEI-2010), developed by the United States Department of Agriculture, to assess the study participants’ dietary quality.

    “A well-balanced diet of fruits, veggies, whole grains, low-fat milk and lean protein, with a minimal consumption of sodium and sugary foods and drinks — like soda and junk food — would receive an optimal score on the HEI-2010,” Kern said.

    The adverse impact of increasing healthy food prices compared to unhealthy food prices was particularly strong for people in the middle ranges of income/wealth in the study, and those with higher education.

    “We originally expected to find the largest impact among individuals in the lowest wealth/income group. However, given the price gap that we found, healthy food may be too expensive for the lowest socioeconomic status group even at its most affordable,” Kern said. “So the impact of the price ratio is weaker for this group.”

    A lot of research in public health has been devoted to changing food environments for the purpose of encouraging healthier eating. This is one of the few studies that takes a hard look at prices between foods, compares them, and tries to link them back to their dietary implications.

    Kern and Auchincloss believe more work needs to be done in this arena. In fact, they recently did work (published in Preventive Medicine) that found the price ratio of healthy-to-unhealthy food had a significant association with insulin resistance.

    “Prospective studies that examine interventions effecting food prices — such as taxes on soda and junk food or subsidies for fruits and vegetables — would be vital to understand how food prices influence purchasing decisions and subsequent diet quality,” Kern concluded. “Improving diet quality in the U.S., especially for the most vulnerable populations, is a large public health concern and future research could help address this issue.”


  2. Study suggests customers who pay for their purchases by card are less likely to remember the precise amount paid

    November 19, 2017 by Ashley

    From the Alpen-Adria-Universität Klagenfurt | Graz | Wien press release:

    The transparency of spending money depends on the mode of payment used: cash, single-function cards that offer only a payment function, or multifunctional cards which may also include bonus programmes, user identification or other functions. A recent study has shown that the recall accuracy associated with the act of paying is lower for both card formats than it is for cash transactions.

    According to current estimates, approximately 3 billion new so-called smart cards will be issued across the globe in 2017. Smart cards conveniently combine the payment function with additional types of functionality. Since 2000, the number of smart cards that are carried in users’ wallets has grown by around 20 per cent annually. It is anticipated that these types of functions will be made available directly through smartphones or smart watches in the future.

    Intrigued by this boom, researchers at the University of Cologne and the Alpen-Adria-Universität Klagenfurt have recently examined the effect these shifting payment methods are having on the customers. Rufina Gafeeva, Erik Hoelzl and Holger Roschk have carried out a field study, as part of Rufina Gafeeva’s PhD-thesis, to determine recall accuracy in relation to recently made payments. Data were gathered at two separate time points in cafeterias at a German university; the first time point was during the summer of 2015 (prior to the introduction of a multifunctional card on campus), and the second time point was during the summer of 2016 (following the introduction of the multifunctional card). Researchers were able to analyse guided interviews, which were conducted with a total of 496 students immediately after the act of paying.

    “We were able to show that individuals who pay by card have a less accurate recall of the amount paid than individuals who settle their bill with cash,” the research team summarises the findings. In addition, regarding the multifunctional card, the individual patterns of use play a critical role: “Individuals who use the non-payment functions of the multifunctional card are less likely to remember the transaction details accurately.”

    According to the authors of the study, these results are relevant for the financial wellbeing of everyone. After all: “A precise recollection of past spending has an effect on the willingness to spend money in the future,” the researchers explain. Efforts to encourage the customer to adopt a financially healthy behaviour require increased transparency. “To heighten our awareness we need designs that separate the payment function from other functions, or that visualise the act of spending money, such as immediate payment information or transaction summaries.”


  3. Study suggests long-term states of mind (and impatience) can affect short-term financial decisions

    November 6, 2017 by Ashley

    From the MIT press release:

    Imagine you are receiving a refund payment from the federal government. Are you going to spend it right away or save the money? Is that decision based on your short-term finances? Or does it hinge on whether you identify yourself as a “spender” or a “saver” more generally?

    A new study by an MIT economist sheds more light on the quirks of people’s actions in such cases and suggests that, in addition to immediate financial needs, persistent behavioral characteristics play a key role in even short-term pocketbook decisions.

    The study examines the 2008 economic stimulus payments the U.S. federal government sent to households across the nation. The study’s rather nuanced findings indicate that while people do “smooth” their consumption by spending or saving money based on their own liquidity — as canonical economic theory holds — some longer-term factors are at play as well.

    For starters, other things being equal, lower historical incomes, not just short-term fluctuations in income, match a greater tendency to spend money right away. Beyond that, people who describe themselves as habitual “spenders” will plow through newfound money more quickly. This adds credence to the idea that larger behavioral tendencies, not just rational calculations, help drive financial decisions.

    So while material needs matter, self-assessments about being “savers” or “spenders” do “a phenomenally good job of separating those who save from those who don’t,” says Jonathan Parker, the MIT economist who authored the study. “It’s a question about impatience. Are you someone who is impatient? If you get ‘yes’ for that answer, those are the spenders.”

    The study bears on larger matters of both personal finance and tax policy, since the distribution of tax refunds by income bracket, for example, is tied to their overall economic impact. Like other research, the study shows that people lacking considerable income or wealth are more likely to spend such refunds more quickly.

    “It does suggest that lower-income, lower-liquidity folks tend to tie their consumer demand very much to income,” says Parker, the Robert C. Merton Professor of Finance at the MIT Sloan School of Management.

    The paper, “Why Don’t Households Smooth Consumption? Evidence from a $25 Million Experiment,” appears this month in the latest issue of the American Economic Journal: Macroeconomics.

    Spend now: Three times as much, in fact

    To conduct the study, Parker took advantage of a quirk in the 2008 stimulus. The federal government sent the payments to households on a schedule determined by the last two digits of the recipients’ social security number, something that is unrelated to financial circumstances or personal characteristics. Therefore the timing of the receipt of payments — and the subsequent spending that resulted — was effectively random.

    All told, the study encompasses about 29,000 households actively participating in the Nielsen Consumer Panel, an ongoing survey that measures spending habits and household characteristics across the U.S. The average payment was around $900 per household.

    On one level, the research reinforces the idea that basic financial need drives a certain portion of the household spending. On average, household spending on household goods rose by 10 percent the first week after the payment arrived, and by roughly 5 percent over the first four weeks. But households with low liquidity, which comprised 36 percent of those surveyed, spent more than three times as much of the money in the first week and more than twice as much of the payment in the first four weeks.

    “There are people who have persistently lower incomes and lower liquidity, who spend this money when it arrives,” Parker says. Historical income performance was also bound up in this response. As Parker writes in the paper, “low income in 2006 is as good as” liquidity status at the same time, when it comes to “separating the households who spent from those who did not.”

    Meanwhile, self-conception and long-run spending habits also influenced outcomes considerably, adding a wrinkle to existing models of household behavior in these circumstances. Parker’s research found that those who describe themselves as people who prefer to “spend now” rather than “save for the future” had a threefold increase in spending.

    “I think it suggests to me there is a lot of heterogeneity on the preference side and the behavior side,” Parker says. “Despite the first-order importance of the financial variable in separating people, there’s also a lot of evidence that preferences matter a lot.”

    Or, as he adds, “my findings are consistent with a reasonably simple model in which people with different degrees of impatience try to maintain a stable standard of living but face limits on low-cost borrowing. For the range of differences in behavior that I uncover, so-called behavioral modeling assumptions are second order.”

    Research implications

    The income distribution of any federal income tax cut or refund is an inherently political matter, and the outcome of current efforts in Washington to pass new tax legislation is uncertain. But regardless of policy outcomes, economists can continue to adjust their own models of consumer behavior based on new empirical findings.

    Such models can also better inform the scoring of tax changes, as well as other models of policy, such as those used by the Federal Reserve to characterize how households respond to movements in interest rates.

    In this vein, Parker’s study joins a growing body of literature (including some of his own previous work) that modifies the most streamlined models in which people smooth out consumption in anticipation of drops or increases in income — and instead accounts for the bumps and jolts in spending that the data reveals.

    “We think that people try to maintain a reasonably stable standard of living,” Parker says. And yet, he notes, people “do an awful lot of spending when money shows up.”

    In research terms, Parker says, one contribution of the study is to “cleanly identify and connect differences in spending behavior across people, to measureable differences in people,” such as their self-conceptions as “spenders” or “savers.” He hopes his work will pave the way for improved mathematical models of “consumption and savings and borrowing decisions that incorporate, in a simple yet rigorous way, these differences in behavior.”


  4. Study examines how the financial press influences investors’ opinion and behaviour

    October 31, 2017 by Ashley

    From the University of Luxembourg press release:

    Researchers at the University of Luxembourg have found that the financial press can have detrimental or positive effects on the behaviour of investors and their opinion on the economy as a result of the language used in reporting.

    While a link between financial news and the behaviour of investors has long been assumed, this study (“Modifier words in the financial press and investor expectations”) is the first to deliver empirical data confirming a significant correlation between the press and the development of stocks.

    For the experiment, a group of 80 participants with a background in economics were presented with various news items about particular stocks. In the news items, the names of the companies were anonymized, but they included so-called “modifier words” giving each article a more negative (e.g. “devastating”, “shocking”) or positive (e.g. “healthy”, “encouraging”) angle. The factual information remained the same.

    Participants were then asked to assess the future performance of the stocks with a clear pattern emerging: positive news coverage also led to a positive evaluation and vice versa. Importantly, the style of news reporting had an impact on the hypothetical decision of participants to buy or sell stocks and their overall estimation of the economy.

    Language matters!

    The team of researchers – Prof. Roman Kräussl from the University of Luxembourg’s Luxembourg School of Finance and Prof. Ronald Bosman and Elizaveta Mirgorodskaya (both Vrije Universiteit Amsterdam) – concluded that the evaluation of the economy is less fundamental data-driven than it is emotional impression-driven.

    With the press playing a big role in how the public perceive and understand the economy and financial markets, the experiment provides evidence of the influential role of the media. “In a time when journalism is increasingly under pressure, it is important to highlight the influence media can have on real life scenarios,” commented Prof. Kräussl. “We live in the age of ‘fake news’ and ‘alternative facts’, of fast-paced online and social media. Our research clearly shows the importance of factual and accurate reporting and the power that words yield over investors and, by extension, stock markets and the economy.”


  5. To kickstart creativity, offer money, not plaudits, study finds

    October 12, 2017 by Ashley

    From the University of Illinois at Urbana-Champaign press release:

    How should employers reward creative types for turning in fresh, inventive work: with a plaque or a party recognizing their achievement, or with cold, hard cash? According to new research co-written by a University of Illinois expert in product development and marketing, it’s all about the money, honey.

    In contexts where a premium is placed on being original, social recognition as a reward for an especially imaginative piece of work doesn’t necessarily enhance creativity, says published research co-written by Ravi Mehta, a professor of business administration at Illinois.

    “The general consensus in the research literature on creativity is that money hurts creativity,” Mehta said. “But most of that prior research was conducted with children as the test subjects, and the participants were not specifically told that the reward was for being creative. So what is it about the contingency of rewards that impacts creativity, and would adults respond to all types of creativity-contingent rewards the same way?”

    Across five experiments, Mehta and his co-authors examined the role of creativity-contingent monetary rewards versus creativity-contingent social-recognition rewards on creative performance, providing new insights into the underlying motivational processes through which these rewards affect creativity.

    The experiments demonstrated that, within the context of creativity contingency, monetary rewards induce “a performance focus,” while social-recognition rewards induce “a normative focus,” according to the paper. The researchers found that the former enhances one’s motivation to be original, thereby leading to more inventiveness in a creative task, while the latter hurts it.

    “We found that if you tell people to be creative and then give them monetary rewards, they will be more creative,” Mehta said. “But wouldn’t the same be true of all rewards? If you tell people to be creative and then give them a social-recognition reward instead of money, then they’ll be just as creative as those you reward with money, right? We found no empirical evidence for that.”

    Mehta said social recognition is “all about people knowing about you and your work, and thereby influencing one to act more in accordance with social norms,” whereas creativity means “coming up with something different, something novel, something that is not the norm.”

    “As adults, we don’t want to come up with something that’s too radical, too out-there, especially when we know that our peers will be judging us,” he said. “Most of our daily activities as working adults are about adhering to social norms. We don’t want to stand out too much.”

    But when a monetary reward is dangled, people amp up their performance and consciously try to “blow the doors off the competition” in terms of creativity, Mehta said.

    “When you ask someone to be creative, you’re asking them to be transgressive, to think beyond social norms and thought processes that are not automatic,” he said. “That’s why a social-recognition reward kills creativity, because it makes creators more risk-averse. It appeals to conformity, to not standing out, which drives you to the middle, not the edge. It compels you to fall in line with social norms, and there’s less motivation to be creative.

    “People who value creativity value the bizarre, the stuff that’s out there. Therefore, they’re less likely to care about the approval of others, or a sense of belonging with their peers.”

    The research has practical applications for how people generate creative ideas, and how to motivate creative-class employees.

    “There’s a trend among companies for crowdsourcing ideas or user-generated content,” Mehta said. “Virtually all social media is user- or consumer-driven. This ought to point them in the right direction: Money talks, but social recognition doesn’t.”

    The research also is applicable to people who work at ad agencies or in creative fields.

    “A little caveat, though: People in those fields are expected to be creative, so social recognition also would work for them,” Mehta said. “But more money certainly wouldn’t hurt them, either. In that case, both rewards would lead to more creativity.”

    The paper will be published in the Journal of Consumer Research.


  6. Study looks at factors that affect which child parents spend more money on

    by Ashley

    From the Society for Consumer Psychology press release:

    Imagine a parent who is shopping and has a few moments to spare before heading home. If the parent has both a son and daughter but time to buy only one surprise gift, who will receive the gift?

    Findings from a new study available online in the Journal of Consumer Psychology suggest that a mother would have a high likelihood of buying something for her daughter, while a father would choose a gift for his son. While more than 90 percent of people in the study said they treat children of different genders equally, researchers discovered that most parents unwittingly favor the child of the same sex when it comes to spending money.

    “We found that the effect was very robust in four different experiments and across cultures,” says researcher Kristina Durante, a professor of marketing at Rutgers Business School in New Jersey. “The bias toward investing in same-gendered children occurs because women identify more with and see themselves in their daughters, and the same goes for men and sons.”

    In one experiment, the researchers recruited participants who had a child of each gender. The participants were told that they would receive a treasury bond of $25 for one of their children, and they could choose who received it. The majority of mothers chose to give the bond to their daughters, while the fathers preferred their sons. To test if the gender bias occurred in a different culture, the researchers conducted the experiment among parents from India, and the results were the same.

    Participants also favored children of their own gender when deciding who would receive more in the family will. The researchers conducted another experiment at a zoo where participants with a child of each gender were given one raffle ticket after filling out a survey. They had to decide whether to enter the raffle for a girl’s back-to-school backpack or a boy’s backpack. Mothers chose the girl’s backpack 75 percent of the time and fathers picked the boy’s backpack 87 percent of the time.

    The findings have implications for children as they are growing up in different families, Durante says. If mothers make most of the decisions about a family’s spending, then daughters may receive more resources such as healthcare, inheritance and investments than their brothers. If fathers are in control of the family finances, then sons may be more likely to benefit in the long-run. This unconscious gender bias may also have ramifications far beyond the family, Durante says.

    “If a woman is responsible for promotion decisions in the workplace, female employees may be more likely to benefit. The reverse may be true if men are in charge of such decisions,” says Durante. “If this gender bias influences decisions related to charitable giving, college savings, promotions and politics, then it can have profound implications and is something we can potentially correct going forward,” says Durante.

    Find more online at: https://www.journals.elsevier.com/journal-of-consumer-psychology/forthcoming-articles/do-mothers-spend-more-on-daughters


  7. Study suggests gender differences in financial risk tolerance linked to different response to income uncertainty

    September 30, 2017 by Ashley

    From the University of Missouri-Columbia press release:

    Prior research has long shown that women are, on average, less risk tolerant in their financial decisions than men. This is a concern as investors with low levels of risk tolerance might have greater difficulty reaching their financial goals and building adequate retirement wealth because they are unlikely to invest in stocks. Now, a researcher from the University of Missouri has found that men and women do not think about investment risks differently. Instead, income uncertainty affects men and women differently, which leads to differences in risk tolerance.

    “Risk tolerance is one of the most important factors that contributes to wealth accumulation and retirement,” said Rui Yao, an associate professor of personal financial planning in the MU College of Health and Environmental Sciences. “It is important to understand what causes women to be less risk tolerant so that financial planners can better serve their needs as women, on average, live longer than men and often need more retirement savings.”

    For her study, Yao examined data from the Survey of Consumer Finances. The survey is conducted every three years and supported by the Federal Reserve and U.S. Department of the Treasury. By analyzing data from nearly 2,250 unmarried American individuals, Yao found that women are more likely to have uncertain incomes from year to year. Life events such as child birth, child care and care-giving often contribute to women’s income uncertainty.

    Yao also found that, on average, women had lower net worth than men. This may have resulted, in part, from women keeping funds in accounts with low returns to buffer the risk of negative income shocks.

    One-quarter of women and one-fifth of men in the sample reported using a financial planner for saving and investment decisions, but the advice given to women may not be in their best interest. Yao suggests that financial planners need to understand the differences in income uncertainty and net worth between men and women and the way in which these differences relate to risk tolerance.

    “Simply telling women to be more risk tolerant is ineffective,” Yao said. “In fact, it might encourage women to take more financial risks than they can tolerate, which could lead to more problems in the future. The difference in investment advice received by men and women requires further investigation, particularly given the new fiduciary standards for financial advisors.”

    Yao’s advice to women is to plan for income uncertainty by creating a financial strategy that fits their needs. For example, when anticipating child-rearing or care-giving periods in the near future, women can and should be more conservative in their investing. When those periods are coming to an end, women should work with their financial planners to make riskier investments.


  8. Study suggests groups lie more than individuals

    September 14, 2017 by Ashley

    From the Institute for Operations Research and the Management Sciences press release:

    Do you pride yourself on being an honest person? Even individuals who have a proven track record of honest behavior are no match for the potentially negative influences present in a group dynamic, especially when money is at stake, according to a new study, published in the INFORMS journal Management Science.

    When organizations are exposed for large-scale deceptive or corrupt behavior, often it is not the actions of one or two employees, but a coordinated effort of many individuals, to include upper level management. Prominent examples include the bankruptcies of WorldCom and Enron, and even more recently, the alleged issuance of faulty emissions certificates by German car manufacturer Volkswagen. The study, “I lie? We lie! Why? Experimental Evidence on a Dishonesty Shift in Groups,” explored what motivates a group of people, especially those who previously behaved honestly, to work together to deceive.

    The study authors, Martin G. Kocher, Simeon Schudy and Lisa Spantig, all of the Ludwig-Maximilians-University of Munich, studied 273 participants in both individual and group situations. Participants, who were paid for their role in the study, were shown video of dice rolls and asked to report the number shown on the die. The higher the reported die roll, the larger the monetary compensation. Participants were evaluated on an individual basis, and in two group settings: one in which all members of the group must report the same die roll to receive a payoff, and another in which members do not have to report the same die roll to receive a payoff. In the group settings, members are able to communicate with each other via a chat feature.

    “We observed that groups lie significantly more than individuals when group members face mutual financial gain and have to coordinate an action in order to realize that financial gain,” said Kocher.

    Of the 78 groups that participated in the study, arguments for dishonesty were explicitly mentioned in 51 percent of the group chats. In fact, of the messages that were exchanged among group members, 43.4 percent argued for dishonest reporting, while only 15.6 percent consisted of arguments for honesty. Interestingly, the authors found that the number of individuals in each group who had exhibited dishonest behavior in the individual portion of the study had no real impact on these results, as dishonesty occurred even in groups where all members had previously responded honestly.

    The ability for group members to exchange and discuss potential justifications for their dishonest behavior can create an overall shift in the group’s beliefs of what constitutes moral behavior,” said Spantig. “This allows them to establish a new norm regarding what does or does not constitute dishonest behavior,” according to Schudy.


  9. Study links mental health to retirement savings

    September 13, 2017 by Ashley

    From the Medica Research Institute press release:

    The question of how mental health status affects decisions regarding retirement savings is becoming a pressing issue in the United States. Key factors contributing to this issue include the tenuous state of the Social Security system, greater use of defined-contribution pension plans by employers, longer lifespans, and the rise of depression and other mental health issues in older Americans.

    In the latest edition of the journal Health Economics, researchers Vicki Bogan of Cornell University and Angela Fertig, research investigator at Medica Research Institute, find that mental health problems have a large and significant negative effect on retirement savings.

    “A growing number of households are dealing with mental health issues like depression and anxiety,” says Fertig. “Our project studies the effect that mental health issues have on retirement savings because we need to understand how health problems may affect the economic security of this growing population.”

    The researchers found that psychological distress is associated with:

    • up to a 62 percent lower probability of holding retirement accounts
    • $15,000 less held in retirement savings accounts by single households and $42,000 less held by married couples
    • up to a 47 percent higher probability that married couples withdraw from their retirement accounts

    The results are generally consistent across single and married households. However, the study found some evidence to indicate that singles with psychological distress may divert funds away from retirement accounts, while married individuals with psychological distress may withdraw more from their retirement accounts. The study did not find evidence indicating that psychological distress affects retirement savings behavior through financial literacy or cognitive limitations.

    The effect sizes found are large, suggesting that more employer management and government regulation of defined-contribution pension plans, IRAs, and Keogh retirement accounts may be warranted.

    “The magnitude of these effects underscores the importance of employer management policy and government regulation of these accounts to help ensure households have adequate retirement savings,” says Fertig. “Better understanding the link between mental health and retirement savings decisions could inform policy interventions that may encourage households to save sufficient funds for retirement through defined contribution plans and shape national changes to the defined contribution plan withdrawal penalties.”


  10. Study suggests personality may drive purchasing of luxury goods

    September 6, 2017 by Ashley

    From the University College London press release:

    People who are extraverted and on low incomes buy more luxury goods than their introverted peers to compensate for the experience of low financial status, finds new UCL research.

    The study, published today in Psychological Science, used real life spending data from UK bank accounts to investigate the spending habits of richer and poorer people with different personality types.

    People living on a low income often feel low status in society and spend a higher percentage of their money on goods and services that are perceived to have a high status.

    “We’ve shown that personality looks to be an important factor in how people respond to living with limited resources. We hope this new association will help us better understand which people may be likely to engage in behaviour that perpetuates the conditions of financial hardship,” explained Joe Gladstone, study co-author from UCL School of Management.

    Previous research has found that people who are sociable and outgoing care more about their social status than others. The new research shows that when extraverted people have a lower income, they spend proportionately more on status goods than introverts on the same income. At higher incomes, the difference in spending lessens as introverted people buy more luxury goods.

    “It’s clear from our study that an extraverted personality is a driver for low-income individuals purchasing more luxury goods, and this is most likely to compensate for a perceived low social status that isn’t as keenly felt by introverts. We saw very little difference in the spending habits of introverts and extraverts with high incomes,” said Blaine Landis, study co-author from UCL School of Management.

    The study was conducted in collaboration with a UK-based multinational bank. Customers were asked whether they would complete a standard personality questionnaire, and to consent to their responses being matched anonymously for research purposes with their bank transaction data.

    The study analysed thousands of transactions from 718 customers over 12 months. The results took into account other factors that could influence spending habits, such as age, sex, employment status and whether the customers had children. Cash spending was also taken into account.

    Each person’s spending data were sorted into a number of spending categories from one (very low status) to five (very high status). High-status categories (i.e., those with average scores of four or five) included foreign air travel, golf, electronics and art institutions, whereas low-status categories (i.e., those with average scores of two or one) included pawnbrokers, salvage yards and discount stores.

    The team found the interaction between income and extraversion in predicting spending on luxury goods is significant and emphasize that while this useful in understanding the relationship, further research is needed to see whether the relationship is causal and whether the results are representative of the UK population as a whole.