Pricing of Conspicuous Goods:

Social needs play an important role in the purchase of conspicuous goods. In this paper, we extend traditional economic models to accommodate social needs, such as desire for uniqueness and conformism, and examine their implications for pricing conspicuous goods. In the context of a duopoly, we identify the conditions under which the desire for uniqueness can increase demand among some consumers as the price of a product increases. Second, we show that while the desire for uniqueness leads to higher prices and firm profits, a desire for conformity leads to lower prices and profits. Third, we find that consumers purchase high quality products not because of their desire for uniqueness, but despite it. Finally, marketers of conspicuous goods might find it beneficial not to highlight the functional differences among their products, when the need for uniqueness is high. In a laboratory test, we find support for the claim that demand for a product among consumers who desire uniqueness might increase as its price increases. 1