Thorstein Veblen
When the Price Is the Product
For some goods the price is part of what is sold
The Theory of the Leisure Class (1899), chapter 6; Leibenstein, Quarterly Journal of Economics (1950)
You cut your price and fewer people asked. When does the price itself become part of the thing being bought?
What actually happened?
Veblen asks us to imagine two silver spoons, one beaten out by hand, the other pressed by a machine, a close copy. People pick up the hand-wrought one and find it handsome. Tell them it came from a machine and the same spoon loses some of its charm. Part of what they liked was that it was not cheap.
Costliness passes for beauty
He wrote that much of the pleasure we take in costly things we call beautiful is "a gratification of our sense of costliness masquerading under the name of beauty." The buyer sees the price and reports it as taste.
In experiments, the same wine described as dearer is rated as tasting better.
Others gave it a name later
In 1950 the economist Harvey Leibenstein called one version the Veblen effect: some goods are wanted more, not less, as they get dearer. Veblen himself never drew that demand curve; he was writing about display.
Some luxury brands raise their prices and the queue gets longer.
First find out what is being bought
If a customer buys for use, a price is a price, and cutting it just makes the thing cheaper. Only when the buyer uses the object to say something about himself does the price go home with the goods. Which kind are your customers?
A plumber's quote gets haggled over; a handbag's price tag is half of what the buyer is carrying.
How do I use it today?
Where you are: your work is good, you have kept the price low, and fewer people ask.
Ask first: do the people who buy this buy its use, or what it lets them show? For the first, a cut is a cut; for the second, the price is part of the goods.
Where it goes wrong: raising the price on everything. It holds only for things bought to be seen; for things bought to be used, high is just high.
Lines to keep
A price cut saves money and may lose the signal.
Part of what they love is that it is not cheap.
Is this bought to use, or to show?
Same situation, other people are asking
I cut my price and fewer people asked.I don't know what to charge · all 1 questions →If this one named what you are going through,
send it to someone who needs it, or keep it somewhere you will find it again.