Investigating changes in the price elasticity of high-priced goods during COVID-19

Abstract

The COVID-19 pandemic has increased individuals' awareness of safety needs. The perceived threat of COVID-19 disrupted consumer's buying behavior, which led to a preference for high-priced products. High-priced products, known for their symbolic safety value, attracted consumers, even in categories where functional safety features are less relevant. As consumer preferences shifted toward higher-priced products, consumers showed lesser sensitivity to price increases. In this study, I hypothesized that the heightened safety-seeking tendency influences consumer perceptions of price, leading to preferences for more expensive products. To test the hypothesis, I used the regression model to estimate both before and after COVID-19 price elasticity of high-priced bag/handbag products compared to low-priced bag/handbag products. The result showed that products positioned at higher price points within the high-end products show more price inelasticity during COVID-19 than lower-priced products. Despite the increasing frequency of price promotions during the pandemic, the study's results imply that price promotion strategy have a minimal effect on high-priced products. Consumers are more safety-seeker during COVID-19, and significant discounts on high-priced products might signal lower quality, demotivating consumers to spend.