Experience and Identity-driven Consumer Choice: Evidence from China

Abstract

We study how shared experiences of political events can have a long-term effect on consumers' identity-driven brand choices, and how geopolitical conflicts can activate the effect. Our empirical strategy uses a generalized difference-in-differences design to exploit spatial variations in the intensity of China's Cultural Revolution (CR), a radical political movement during 1966-1976, and cohort variations in the number of impressionable years during CR. We observe over 11 million vehicle choices of individual Chinese consumers from 2012 to 2013. We find that the experience of CR increases the likelihood of choosing Chinese brands, controlling for location, birth-year cohort, and product attributes (e.g., price and class). Moreover, the effect is only significant after the China-Japan conflict in August-September 2012 activated Chinese national identity. The dynamics show the effect persisted throughout 2013 after the activation. Exploring heterogeneous effects, we find that the effects are stronger for more recognizable Chinese brands as well as more expensive models, and we rule out alternative mechanisms such as fear of violence.