Can High Price Positively Affect Perception of Value? - Page 3

I would say that J.Crew is a perfect example.

They sell Timex watches for like $150 and Redwing boots at a substantial markup as well. I also have two identical, except for the weight of the lining, ties; one from J.Crew and one 'off-brand'. I'm certain they were made in the same factory, but one retailed for $15 and the other $60.

Look no further than Grey Goose vodka to prove this theory.

Gibson guitars did this as well.

This is a well documented fact, as the first response stated. On a related note, goods which people consumer in higher quantities as the price increases are known as "Giffen goods". Surprisingly, it is not limited to luxury goods but also some essentials.

I think you are thinking of Veblen Goods. I think they don't exist in real life, or so I remember from when I studied them. Giffen Goods are something different, and they don't really exist either, apart from maybe rice in China.

I feel like this was an appropriate response though. On a college campus, you have a lot of different money situations...rich kids with the parents paying for everything, poor kids with the parents struggling to pay for everything (so extra costs are no good), middle class kids paying for everythign themselves, etc. Now normally the money solution would work...if you are trying to divide up a luxury high rise, nobody is going to complain about price differances for the penthouse since at the end of the day, they are all living in a luxury high rise. On a college campus it is different, everybody has got to live there and the universities tend to like diversity which is helped by their fixed cost models. If you start solving things with money, you will end up separating kids by whether or not their parents have money which isnt really a good distinction (unless the parents have a LOT of money, it probably isnt going to affect the rest of their lives that much).


Yeah, this sounds like the effect of a Veblen good--somethign that is consumed for the show-off factor and thus the higher price tag is worth it so long as everyone else knows that the pricetag is higher. A veblen good can start to look like a Giffen good (cut-rate lawyer raising prices to look legitimate) but a true Giffen good has a positive price elasticity of demand. This would mean that a higher price makes it more desirable across the board and simply does not exist.

If Grey Goose was a Giffen good, you might be standing at a store with a bottle in your hand priced at $50, comparing it to some other $50 vodka and the sales associate could say, I can tell you are really interested and I want to sell you the grey goose so lets make a deal...I'll give it to you for $55. If it was a Giffen good, you would take the Grey Goose over the other vodka and leave...since it is not, you would look at the SA like he was crazy and buy the other bottle since it is now cheaper than the Grey Goose.

dam, everyone beat me to grey goose, same with asian stuff like colthes, if you buy a tailored suit from somewhere like WW chan and come home, ignorant people seem to think that its asian and crap when its certinaly not the case.
regards,

This is correct. Giffen goods are a sub-group of "inferior goods," which have a very special consumption pattern (theoretically) driven by more than just price ie. income and income elasticity as well as substitutes and cross-elasticity are the real factors. The oft-cited Giffen goods of history, being potatoes in ireland and rice in china, have been largely debunked.

Veblen goods are the theoretical luxury goods in which price alone supposedly drives demand. --The "it's expensive so it must be good" or "it's expensive so other people must think it's valuable and so should I" effect.

Sounds like a .com stock in 1998.

"ZOMG I waited one day and it went up $5 more, I gotta get on this before I miss the next Microsoft!!!!!!!"

The same results were reported by bassist Will Lee in an interview with him that I read a while back: doubling his session rates got him twice as much work...

Was reading a book the other day which mentioned that Chivas whisky was about to go bankrupt until they decided to double its price and this led to a surge in sales.

And another incident where jewelry sold at 250$ wasnt selling but a clerk increased the price to 25000 by mistake and it sold instantly.


Most people arent knowledgeable nor take enough time to research the products, and often take price as the marker of quality and value.