Customers often value a good more when its price goes up. One reason may be its signaling value. An expensive handcrafted mechanical watch may tell time no more accurately than a cheap quartz model; but, because few people can afford one, buying it signals that the owner is rich.
Interpretation
Higher prices can increase perceived value due to their exclusivity.
This quote by Raghuram Rajan highlights the psychological phenomenon where consumers tend to value products more when they are priced higher. It emphasizes that an object’s price can act as a signal of quality or status, illustrating how a luxury item, like an expensive watch, carries more perceived value not solely based on its functional benefits but also on the social status it conveys to others.
In practice
This quote can be used in a marketing presentation to illustrate how brand pricing strategies can influence consumer behavior.
The U.S. should worry about the effects of its polices on the rest of the world. We would like to live in a world where countries take into account the effect of their policies on other countries and do what is right, broadly, rather than what is just right given the circumstances of that country.
The problem with forbearance is that it always looks like a good thing to do until it stops working.
Perhaps the hardest challenge has been to persuade the public, impatient for rapid growth, of the need to ensure stability first. Growth, it is argued, is always more important, regardless of the looming economic risks.
Too many years away from academia renders you pretty incompetent at research and teaching. So I had to go back.
The gap in India has always been between the promise and the execution.
Democratic accountability means that governments must be popularly accepted, with citizens empowered to replace corrupt or incompetent rulers.
To a person of analytical ability, perceptive enough to realise that mathematical equipment was a powerful sword in economics, the world of economics was his or her oyster in 1935. The terrain was strewn with beautiful theorems begging to be picked up and arranged in unified order.
Fundamentally, there are only two ways of coordinating the economic activities of millions. One is central direction involving the use of coercion - the technique of the army and of the modern totalitarian state. The other is voluntary cooperation of individuals - the technique of the marketplace.
Wherever there is great property there is great inequality. For one very rich man there must be at least five hundred poor, and the affluence of the few supposes the indigence of the many. The affluence of the rich excites the indignation of the poor, who are often both driven by want, and prompted by envy, to invade his possessions.
People want economy, and they'll pay any price to get it.
There can be economy only where there is efficiency.
Actually, in my advanced, high-falutin' frontier economics, I often work with what I define as 'money metric utility,' and I ask people, 'Do you really want that? What are you willing to pay for that?'
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