Lessons from an Ad Man - Superb microeconomics!

Sunday, October 25, 2009

The wonderful Rory Sutherland wows the audience at the TED conference in Oxford with a superb sixteen minute talk on advertising and aspects of behavioural economics. It is an immensely watchable video that will allow you to discuss with your students concepts such as perceived value, symbolic value,intangible value, hedonic opportunity cost and some ideas for nudging personal behaviour in socially beneficial ways. We learn of the extraordinary value of placebos, the rebranding of the potato in Prussian Germany. That all value is subjective and that persuasion is better than compulsion. Some super examples too of Veblen Goods, price discrimination and how the framing of the Italian penalty points system for drivers in Italy has a different impact than for motorists in the UK.

Rated: (5/5), based on 10 reviews

Posted to A2 Micro • AS Micro • Behavioural Economics • Business Economics • Teaching of Economics
Tags: price, economics, incentives, advertising, opportunity cost, behavioural economics, veblen goods, marketing, perceived value
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Buffett’s Veblen buffet

Sunday, June 28, 2009

by Mo Tanweer

Whilst it seems that a dinner with the legendary investor Warren Buffett still retains its Veblen good features (when peoples’ preference for buying a good increases as a direct function of its price, instead of decreasing according to the standard laws of demand); it seems that it also has an inelastic YED, with the credit crunch having a limited impact.

If you’ve got it, flaunt it!

Tuesday, March 03, 2009

by Penny Brooks

Luxury cars are often given as examples of Veblen goods due to their price, which generates a certain amount of status – the owner enjoying their ostentatious consumption. A report in the Times bears this out very neatly. Yesterday Porsche released sales figures for 2008 – the Porsche Boxster is clearly a ‘normal’ good at the cheaper end of their range (as little as £30,000), and its sales have followed the pattern of most of the automotive industry and collapsed from 9,835 to 3, 950 (a 60% fall) whilst the 911, which the Times report calls a ‘real Porsche’ and costs up to £90,000, fell only 17% from 16,261 to 13,543.

Moving up the scale, Ferrari sold 6,587 cars, only 2% fewer in 2008 than in 2007, and Rolls Royce sold 1,200 cars worldwide, a 20% increase. The commentary in this article suggests that as an ‘aspirant’ car, the Boxster is for those on the way up with volatile incomes, while the Ferrari or Rolls is for those who have already arrived (and Premier League footballers), and are happy to let other road users know that.

Posted to AS Micro • Market Equilibrium and Price • Nature of Demand • Recession Watch!
Tags: price, veblen goods, ostentatious consumption
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