“If Apple is indeed a Veblen brand (or more accurately, the goods produced by Apple are Veblen Goods) then why not try to raise the price of the next iPhone by $100?” Tim Worstall writes for Forbes. “For the increase in price might even boost sales.”
“Yes, I know, it’s a slightly farfetched idea but there is a solid economic background to it. It shouldn’t happen in a world where purely neoclassical economics holds sway but an awful lot of modern economics is about finding out when and where those purely neoclassical assumptions don’t hold,” Worstall writes. “As a first stage, the existence of brands and product differentiation means that there’s at least more complexity to the world than the standard assumptions allow.”
“A Veblen Good… This is where the value of the item is perceived as being determined by the fact that it is expensive. Owning an iPhone, in this formulation, would show that you are the sort of person who owns an iPhone. Thorstein Veblen, who we name these goods after, coined the theory of conspicuous consumption and that’s what this is all about,” Worstall writes. “All of us do it sometimes as well: we will purchase a produce precisely because it advertises something about us that we wish to have advertised. Perhaps that we’ve got the good taste to realise that this is the best product but in the purer form we’re saying that we’re rich enough to purchase this more expensive version of whatever it is.”
Read more in the full article here.
MacDailyNews Take: If lines around the block for a decade plus don’t scream “Veblen Goods,” nothing does. A product can be a “Veblen Good” and also the best product available.
As http://macdailynews.com/2014/04/14/analyst-apple-negotiating-to-raise-prices-by-100-for-iphone-6/we wrote yesterday: “Exotic materials, esoteric manufacturing processes, unparalleled build quality, and seamless access to unequaled ecosystems that patent-infringing imitators simply cannot match is worth well more than $100.”
<Analyst: Apple looks to raise prices by $100 for iPhone 6 – April 14, 2014