Luxury goods seem to defy the traditional demand curve. The higher the price, the more demand!
This may seem illogical but let us remember that people derive utility from exclusivity. So part of the expensive price is due to conspicuous consumption.
However, if it is so exclusive than the market is too small. Hence, luxury firms need to balance between exclusivity and making it known. This article talks about such balance.
If it is so expensive then it would not be known and it would lose the exclusivity because nobody knows…So it has to be expensive enough that only very wealthy can afford but yet known but not too well known.
Now I understand why luxury firms have private showings, need to get the awareness up just to the right level.
Then I wonder how the firms that only cater to the uber rich work. They should be able to charge really high prices to make up for the few units sold. But why would they not also target the slightly less wealthy clients?
I am assuming that there is such a huge gap between those who cater to 1% of the 1% vs. the 99%. Also, despite the huge consumer concentration risk, those firms catering the uber rich, probably charge high enough that they do not have to worry about losing some clients.
Hmmm…this is a good economic research question. How do firms that serve the 1% of the 1% operate?
Pureum's Perspective 