Advertising Investment as a Supplement to Utility Theory: Explaining Chinese Luxury Consumers’ Behaviour 2025

Abstract

For a long time, China's luxury goods market has been dominated by neoclassical utility theory, but this theory cannot grasp the core symbolic value and social value of market behaviour. This study fills this research gap by constructing an extended utility model with advertising investment as the core endogenous variable and combining the preliminary survey data of Chinese luxury consumers in 2025. The model adds linear social utility terms to the logarithmic Cobb-Douglas utility function ( γ Ax ) to quantify the impact of advertising on payment willingness and budget allocation. The research results show that the traditional utility theory cannot explain China's luxury consumption, because advertising reshapes the utility function through the "Mianzi" social utility. Advertising shapes utility through multiple paths - including social dimensions, experience dimensions and financial dimensions - and presents significant income heterogeneity: the absolute increase in luxury spending of high-income consumers is greater, while the proportion of social utility of low-income consumers is higher. In all groups, advertising reduces price sensitivity and increases willingness to pay by embedding symbolic values. This research provides a quantifiable supplement to the traditional utility theory and lays the methodological foundation for modelling culture-specific consumer behaviour.