NS3040 Fall Term 2018 Veblin Goods

Overview Josh Zumbrun and Tripp Mickle, “New iPhone Tests Economic Theory,” WSJ 9/18/2017 Most goods follow the usual demand patterns People will purchase more at a lower price Price largely reflects “use value” However certain products seem to defy economic laws Sometimes more is demanded at super-high prices Called Veblin goods – Thorstein Veblin author of “Theory of the Leisure Class” Veblin thought some consumers want a product even more when the price rises The purchase and use imply status, taste and wealth

Recent Developments Recently Reason for strategy Apple released iPhone X - price $1,000 Samsung Note 8 phone – price $950 iPhone is 50% more expensive than last year Reason for strategy Smart phones running out of customers Just under 100 smartphones per 100 people in US 92 smartphones per 100 people in Europe By 2020 will be 84 smartphones per 100 people globally To increase revenue smartphone makers need to push on price

Conspicuous Consumption

Veblin Good? Apple has found biggest jumps in sales have occurred when new phones launched Biggest spikes came for iPhones that were the most visibly distinct iPhones not a pure Veblin good because demand will still be driven by functionality not just price Still, iPhone X doesn’t appear to offer significantly greater utility than other iterations of the IPhone