Archived posting to the Leica Users Group, 2011/06/14
[Author Prev] [Author Next] [Thread Prev] [Thread Next] [Author Index] [Topic Index] [Home] [Search]Rei, Stocks are the only assets in the world that humans routinely love to buy expensive and sell cheap. What price discovery? Cheers Jayanand On Wed, Jun 15, 2011 at 7:56 AM, Rei Shinozuka <shino at panix.com> wrote: > Akerlof would term "ignorance" "informational asymmetry." > > And even in the capital markets, price discovery is frequently a > non-trivial exercise. > > -rei > > > > On 06/14/2011 01:56 PM, Lawrence Zeitlin wrote: > >> "Inverse Price Elasticity" only works with ignorance - where the buyers >> have >> no idea of quality, only prestige (Rolex, Montblanc, Glenfiddich, etc). I >> have had several discussions in my time with luxury goods manufacturers >> and >> marketers, and they come back with one thing every time - the customer >> they >> really want is the one who knows what he is buying, and does so for his >> own >> satisfaction, not to announce to the world that he has 'made it'. These >> are >> the repeat customers who are highly sought after - they will stay loyal to >> and buy multiple products from the same marque, provided the quality is >> not >> compromised with (Patek, Pelikan, Lagavulin, etc). >> Cheers >> Jayanand >> - - - - - >> I partially agree, but not entirely. If a consumer has a good idea of the >> true quality of a product, he chooses one with the highest quality at the >> lowest offered price. This is normal marketing procedure. But for many >> products, especially technical or luxury products, the consumer has little >> direct knowledge of quality or suitability. Marketers search for a magic >> number to tout their wares in the hope that it will convince the buyer >> that >> their items are the best. For years digital camera makers hyped megapixels >> as a magic metric. Computer manufacturers advertised computers in terms of >> megahertz CPU speeds. Fabric manufacturers, in terms of threads per inch. >> Even Leica talked about the little Black Forest Elves that made the >> wonderful cameras the HCB used. >> >> Numerous market research studies have shown that for complex products of >> unknown or hard to determine product quality, most consumers use price as >> the main quality index. How many times have you heard the canard "You get >> what you pay for." Actually you do not. >> >> The manufacturing and distribution price of a product has minimal >> relationship to the retail price. Price is primarily a marketing decision. >> The same medicinal drug you buy in India may cost ten times as much in the >> US. The same drug, manufactured on the same production line, sold in >> Canada >> costs half as much as in the US. Typically marketers increase the retail >> price until demand falls off. In cases where the manufacturer has limited >> production capability (Leica) the price is set at the point where demand >> matches production. >> >> So take the self serving comments of the luxury goods manufacturers with a >> grain of salt. Few manufacturers are going to admit in public that their >> products are no better than the competitions products but that they have >> managed to convince the stupid consumer to pay twice as much. Of course >> from >> the consumers point of view, if everyone knows the item is more expensive, >> he gains prestige amongst his peers. >> >> Conspicuous consumption anyone? >> >> Larry Z >> >> _______________________________________________ >> Leica Users Group. >> See http://leica-users.org/mailman/listinfo/lug for more information >> > > > _______________________________________________ > Leica Users Group. > See http://leica-users.org/mailman/listinfo/lug for more information >