The Irrational Economics of Luxury Goods
[ Photo credits: https://unsplash.com/photos/_3Q3tsJ01nc/ ] Surfing through the Forbes list of the top 10 billionaires, amongst the tycoons of the tech world, you’ll notice a name that stands for something different, something surprising. Yes! I am talking about Mr. Bernard Arnault, the chairman and CEO of LVMH Moet Hennessy, the umbrella body of about 70 luxury fashion and cosmetic brands including Louis Vuitton and Sephora.[1] A brand exclusively for the privileged- a very small section of the consumer market has been successful in achieving a revenue of 64.2 billion euros in 2021 and a valuation of almost $329 Billion.[2]. This made me wonder about the curious economics that work behind these luxury brands. Are consumers really rational? Is it just utility that matters? [Photo Credits: https://www.statista.com/statistics/245852/total-revenue-of-the-lvmh-group-worldwide/ ] From the normal economic perspective, a consumer is expected to be ra...