Wall Street Journal:
Thorstein Veblen was a cranky economist of Norwegian descent who coined the phrase “conspicuous consumption” and theorized that certain products could defy the economic laws of gravity by stoking more demand with superhigh prices.
And:
Typically, raising the price of a good lowers demand for it. If beef becomes too expensive, people will buy more chicken.
Mr. Veblen’s theory posits that some consumers want a product even more when the price rises because the expense broadcasts status, taste and wealth.
And:
By unveiling the new iPhone X last week with a price of $1,000, Apple Inc. is pushing the envelope even further than Samsung Electronics Co., which unveiled the $950 Note 8 phone this year. Rather than trying to attract consumers with cheaper prices, the companies are fighting for customers with expensive price tags.
And:
The biggest spikes came for iPhones that were the most visibly distinct, such as 2014’s iPhone 6, the model in which Apple changed the shape, enlarged the device and raised prices by $100.
Big lesson learned for Apple with the iPhone 6. I hear a ton of discussion of the pros and cons of the iPhone X, with many opinions on the notch and its distinctive look. Can’t help but think of this as a bit of a badge for Apple, another play towards uniqueness that will mark the iPhone X as the new must-have shiny.
It’s not pricey if the user feels that the device and its functionality are with the expenditure.
My iPhone 7+ with 128GB was about $950. The X is NOT pricey considering its dramatically improved functionality and power. Can’t wait to complete my AT&T purchase plan!
The problem with that assertion is that the X isn’t simply a pricer iPhone it’s also different. For that matter, the assertion doesn’t work with the 6 either – did sales spike there because of price or because there were people who really wanted a bigger iPhone and there was pentup demand?
That’s always been my issue with assertions that “Product N is a Veblen good” – Usually there’s some other quality the product has aside from just a higher price. Grass fed, pastured beef isn’t the same as generic, corporate beef. Great Bordeaux isn’t the same product as Two Buck Chuck. For some, the difference is worth paying for but they’re not paying JUST for status, they’re paying (usually) for those differences.
Interesting that the WSJ is referencing Veblen, a renowned critic of capitalism.
If you are a member of Apple’s Upgrade Program, the cost of the iPhone X is rather incremental, and thus numbing the sting from sticker shock. I think mine will go from like ~$44/mo to ~$50/mo. That ~$72/yr increase, though, might nudge me to self-finance the iPhone X over a two-year period for $50/mo ($1,200 64GB model with Apple Care), after which I can sell it or keep it. Assuming I can sell it for anything significant, its a better deal than the Upgrade Program.
That’s true. But it does explain that people often rationalize expensive purchases on the basis of exclusivity rather than function, and that can work in Apple’s favor.
Agree. The $1k barrier is important psychologically, but really a fairly small actual jump.
Also it gives headline writers something to focus on.
I disagree. There’s no doubt in my mind people actually adjust their tastes to appreciate the more expensive good in many cases.
There was a series of articles recently about how over time, preferences alternated between breastfeeding and formula for infant nutrition. What was striking, however, was that the option chosen by higher-status, higher-income mothers pretty much always happened to be the option that was least accessible to ordinary people.
In other words, mothers clearly felt a strong need to make a decision on this particular behavior in such a way that it enhanced their perceived status.
I have absolutely no doubt this is a strong, universal (but harmful) human compulsion that applies to almost every aspect of life. Including, certainly, one’s choice of phone.
Yes. The Apple program is appealing because it’s simple. You get a new phone right on time, they basically throw in free Apple Care, and you don’t have to go to the trouble to do purchases manually and to re-sell the old phone yourself.
For a single person, it makes a lot of sense. For a household of four, like mine, the costs run up pretty quickly. We constantly have a mix of near-new to 2-3 year old iPhones, and on average I figure each phone winds up costing us about $20/month to own.
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