Status Goods, Luxury Brands, Veblen

Veblen goods are items that grow in demand as their price rises. They are valuable because other people know that they are expensive. The harder and more expensive a Veblen good is to obtain, the more desirable it becomes.

As the world grows more wealthy, the prevalence and relative importance of these status goods grows.

Ferrari, Birkin, Louis Vuitton, Rolex. These are all established brands that deal primarily in the realm of Veblen goods. The dually perplexing part is to these particular brands is that each year, supply goes up. More goods of each brand exist in the world, yet somehow the price continues to rise.

In the world of luxury brands, the perception of exclusivity is critical to maintaining the allure and value that sets these brands apart from the everyday market. Therefore, it is not just about how many units you produce, but also how you manage the perception of your brand's prevalence in the marketplace. If your brand is too ubiquitous, it could diminish its perceived value and exclusivity. Conversely, producing too few units could make it inaccessible, even for those willing to pay for such luxury. Striking a balance between these factors is crucial for an established luxury brand to sustain its high-end appeal and market position.

Despite the high value placed on exclusivity, luxury brands are not entirely divorced from the traditional dynamics of supply and demand. It is true that they deal primarily in status goods, where the appeal lies more in the perceived status conferred by ownership rather than the product's inherent utility or price. Yet, it would be a mistake to assume that these brands can charge limitless prices. There is a threshold beyond which even the most affluent customers will deem a product too expensive.

In practice, luxury brands must understand their target market well enough to set prices that uphold their image of exclusivity while remaining within the realms of affordability for their intended audience. If they push the envelope too far and prices reach exorbitant levels, it could lead to a decrease in demand, disrupting the balance they have carefully curated. In essence, these brands must navigate a complex interplay of perceived value, demand, price, and exclusivity to keep their luxury status intact.

One area that remains empty is the direct ability for consumers of these goods to directly benefit financially from the consumption and promotion of these goods. The value that having the right people be seen with Veblen goods accrues directly to the Brand. This leaves a space to blend some version of financialization, and incentive alignment into Veblen goods. The mass appeal of such a product is yet to be seen as incumbent makers of status goods do not require a sharing of the profit in the current environment.

A thought:

Q: Could a celebrity themselves be deemed to have the same properties as Veblen goods?

A: Indeed, a celebrity's image, or more specifically, their brand, can be considered to have properties similar to Veblen goods. The key reason lies in the exclusivity and desirability associated with celebrities. Just like Veblen goods, as a celebrity's status or fame increases, their perceived value and desirability in the public eye also increase. This perception often translates into higher demand for their time (appearances, performances, endorsements), which in turn allows them to command higher fees.

Moreover, their popularity among the masses and their associated wealth and success make them symbols of aspiration. Their endorsement or association with a product, service, or even an idea can significantly amplify its value and desirability. This phenomenon is often leveraged in marketing and advertising where a celebrity's brand is harnessed to boost the appeal of various goods and services.

However, it's important to note that unlike typical Veblen goods, a celebrity's 'brand' is a much more volatile and complex asset to manage, given it depends not only on their professional success but also their personal lives, public image, and changing cultural trends. The fame and status of celebrities can fluctuate widely, affecting the 'price' they can command for their services and endorsements.