THE ROLE OF COGNITIVE BIASES IN SHAPING CONSUMER PERCEPTIONS OF LUXURY BRANDS

Abstract

Luxury brands occupy a unique space in consumer markets, where products are purchased not merely for functional benefits but for symbolic value, social status, and emotional gratification. Unlike everyday consumption, luxury consumption is highly influenced by cognitive biases—systematic patterns of deviation from rational judgment that shape how consumers perceive value, prestige, and exclusivity. This literature review synthesizes insights from behavioral economics, consumer psychology, and luxury marketing research to examine how biases such as anchoring, scarcity, halo effect, social proof, endowment effect, confirmation bias, price-quality heuristic, and decoy effect influence consumer perceptions of luxury brands. By systematically reviewing the literature, the paper highlights how luxury marketers exploit these psychological tendencies through pricing strategies, heritage storytelling, limited editions, and influencer-driven campaigns. The review further identifies emerging perspectives, including digital luxury consumption, generational differences, and cross-cultural variations in bias activation. A conceptual framework is proposed linking cognitive biases to consumer perceptions and outcomes, including willingness to pay, brand loyalty, and advocacy. Finally, managerial implications are drawn for brand strategy, alongside research gaps emphasizing the ethical concerns of manipulating consumer biases in the luxury sector.