Luxury, is it just a reward or does it have functional value?

“In stating the principles which regulate exchangeable value and price, we should carefully distinguish between those variations which belong to the commodity itself, and those which are occasioned by a variation in the medium in which value is estimated, or price expressed.”

-David Ricardo

I must admit, I had a difficult time choosing the direction of this particular post given that so much interesting material could have been invited into the conversation. The topic at hand here is the quality of a purchase and the psychological implications thereof so with that being said I must introduce the best discipline of all time …Behavioral Economics!

I wouldn’t dare say the “boring stuff” but what I will say is let’s get the technicalities out of the way!

We’ll start of with a brief description of what Behavioral Economics entails!

Behavioral Economics is essentially the marriage of economics and psychology. This school of thought tries to deviate or break away from the classical model of economics which adheres to the notion that humans behave rationally via the fictitious character, the ever so cleverly named “Homo Economicous”.

Straight from my notebook for yer reading pleasure 😀


In Economics…

A Normal Good has a direct relationship with the rise of income meaning as people’s income increases people wish to buy more of this particular good or service.

For example: The eternal deliciousness of a vintage champagne. Pictured here is the king of kings: Dom Perignon (where’s the 1995 bottle?).
No pasteurization here please!

An Inferior Good (doesn’t the name say it all?) has an inverse relationship with the rise of income meaning as people’s income rises people begin to consider themselves too “bougie”for a particular good or service.

In hard times are people willing to give up their Jordans for some good ol’ Shaqs?


I’ve included some graphs for kicks and giggles. Oh do they make everything easier to understand even though some of you naysayers may like to differ!


In Consumer Behavior

According to the SRI Consulting Business Intelligence attitudes involving luxury are divided into the following three groups:

Luxury is functional-These consumers use their money to buy things that will last and have enduring value. They conduct extensive pre-purchase research and make logical decisions rather than emotional or impulsive choices.

Young Fredrick uses a combination of aesthetic, quality, research and price to guide his purchase decisions 🙂

Luxury is a reward– These consumers tend to be younger than the first group (whateva) but older than the third group. They use luxury goods to say, “I’ve made it”. The desire to be successful and to demonstrate their success to others motivates these consumers to purchase conspicuous items, such as high-end automobiles and homes in exclusive communities.


Think this guy: Tai (The Douchebag) Lopez. He advertises his get rich quick scheme by showing off his most treasured rentals, oh I did I say rentals? I mean possessions.

Luxury is indulgence-This group is the smallest of the three and tends to include younger customers and slightly more males than the other two groups. To these consumers, the purpose of owning luxury is to be extremely lavish and self-indulgent. This group is willing to pay a premium for goods that express their individually and make others take notice. They have a more emotional approach to luxury spending and are more likely than the other two groups to make impulse purchases.


I can’t help but to drool at the utter adorableness of this scene from Beverly Hills Chihuahua! Let’s hope she’s drinking S.Pellegrino there and not Chardonnay!


What function does luxury play in your life? Are you like Fredrick (my adorable moose) and conduct intensive research before big purchases  or more of in the moment kind of consumer?


Until next time,

-S ❤

Works Cited

  1. Consumer Behavior: Buying , Having, and Being (11th Edition) by Michael R. Solomon
  2. Economics for Today (8th Edition) by Irvin B. Tucker





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