1. NS3040 Fall Term 2018 Veblin Goods

2. 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

3. 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

4. Conspicuous Consumption

5. 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