The pauper wears prada? How debt stress promotes luxury consumption

Being in debt prevails in the modern society, but little is known about the behavioral consequences of being under debt stress. Based on compensatory consumption theory, this paper examined how debt stress affects people's consumption behavior. Through a survey and three lab experiments, we found that: (1) debt stress increases consumers' luxury consumption intentions; (2) perceived status demotion mediates this relationship, such that debt stress leads to perceived status demotion, which in turn enhances consumers' luxury consumption intentions; (3) lay rationalism moderates this relationship, such that the positive relationship between debt stress and luxury consumption is stronger among less rational consumers. We concluded by discussing the theoretical and managerial implications of our findings.