PRICING SUPERIOR GOODS: UTILITY GENERATED BY SCARCITY

Shuntian Yao and Ke Li ()

Pacific Economic Review, 2005, vol. 10, issue 4, 529-538

Abstract: Abstract. We discuss the pricing of a superior good based on its ‘signalling value’. Our model and analysis offer a different explanation of why in China and some other Asian countries the prices of luxury goods are extremely expensive when they are first marketed, then fall dramatically and discontinuously afterwards, when marginal costs decline to below the critical point and the goods become more popular.

Date: 2005
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