Economic Psychology: Do You Know Why Expensive Goods Look Expensive?


Are we just tricked by price tags?

Why do expensive goods look expensive, and vice versa in most cases? Do high price tags or brand names just hypnotize us into believing so? As writing here sometimes, I’m not interested in buying and owning material things but in investment somehow. My main battlefield is the stock market, but once I researched “watch investment.” At that time, I was so surprised at the price of super expensive watches. Such as Patek Philippe, Richard Mille, etc. Most of them are more than several million dollars. Of course, I immediately understood I was out of place, though. Today, I didn’t mean to raise the question whether the price of such super luxury things is appropriate or not. My interest developed at that time was discovering the factors that make things look the part.

Necessity for a lot of time and effort to produce

Even before making the research on watch investment, I had a decent knowledge about some famous watch brands, such as Rolex, Omega, etc. To be honest, however, I can’t tell the difference from their appearance between luxury and ordinary watches. If I can’t see their brand names on the watch faces, I’m sure they all will look the same to me. This may not be only due to my ignorance or lack of interest. For example, I’ve been playing the guitar for about 25 years, but I can’t tell their differences as well. When things exceed a certain level in quality, it will be difficult for ordinary people to tell the difference.

Having said that, I must admit the super expensive watches looked different. They look really expensive even to me. I suppose it’s because I can see the watches obviously require a lot of time and effort to produce. As you can see in the above image, it’s like a very example of high-precision processed products.

A line of wooden chair frames under process. It's an image in our furniture factory.

Although I wrote above that ignorance or indifference should not be blamed, I must admit a certain level of knowledge may be sometimes required. In summary, let me tell you the reason why expensive goods look expensive. It’s because they have an appearance to obviously make people guess a lot of time and effort are required for production. According to this theory, many people may be less likely to understand the pricing of low-tech products like luxury wooden furniture.

In that case, I guess I have to continuously explain the factors affecting the price-quality relationship of products. They may look similar at a glance, but there are many differences in detail. Such as joints without screws and gaps, the frame structure consisting only of curved lines, etc.

Shungo Ijima

He is travelling around the world. His passion is to explain Japan to the world, from the unique viewpoint accumulated through his career: overseas posting, MBA holder, former official of the Ministry of Finance.

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