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The psychology of luxury: Why people buy expensive things

«Overall, consumption is a social event. With it, we rise above others. If my bottle of wine more expensive your means and I’ll better you.»

If you had the extra 10 thousand dollars, would you spend it on headphones or something like that?

This is not a joke. Headphones for the money do exist, for example, Orpheus Sennheiser Onkyo or Diamond. The question is whether the quality of their sound ten times better than the analogue for a thousand dollars?

It is believed that a more expensive product means the best quality, exclusivity, customization, or any additional bonuses. But is the expensive stuff really is better, and what makes people part with their money?

Expensive headphones, designed for DJs, configured to limit the bass and high frequencies

The study of our perception of the value of goods show that we tend to associate the price and value of the product, and sometimes appreciate expensive things as better or more effective, even if in reality they are no different from the cheap ones.

One study, conducted by researchers from the California Institute of technology and Stanford University, proved that people are not just better appreciate the taste of wine if they are told about its high cost, and what’s more, if you make them at this time, MRI of the brain, it will show that they really enjoy it more when you drink more expensive, in their opinion, drink.

In another study, where we studied the use of placebo as a painkiller, the participants taking, as they believed, pain medication for $2.5 per pill, felt a greater relief than others, who said that the pill only costs 10 cents.

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Find the best

Well, this is an experiment, and how the price affects our decision to purchase in real life? Suppose that there are goods and its equivalent at twice the price — is that true buyers believe that the latter will be twice as good?

Michael Norton, a psychologist and Professor of business administration at Harvard business school, answers this question affirmatively, at least if

to talk about the experiences of the consumer. His research shows that we are committed to finding the best, the so-called peak experiences.

Norton says that the restaurant, food or film, which are all evaluated equally on the top three, it’s a safe option, while if we see the scatter in the estimates from one to five, we can expect anything. According to him, «it is curious that people tend to take risks and choose with ones and fives, because they want to get the best experience — even at the risk of stumbling upon a bad option».

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Norton says that the same mechanism can explain the purchase of very expensive goods or services: «Increase pleasure and improved quality of even gives an additional impetus, and, perhaps, drink a bottle of whiskey cost 10 thousand dollars will be twice as enjoyable than the same bottle for 5 thousand because it is extreme, peak experience.»

Many of us are looking for unique opportunities for recreation, even if it’s not the most pleasant of options, just to «add collection». Anat Keinan and Ran Kivetz write: «Collecting memorable experiences, consumers obtain the satisfaction of subjectively moving forward and increase self-esteem».

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Joshua Map — racer-lover, entrepreneur and a passionate Ferrari collector. He says he collects cars not only out of love for him, but also because it is a pass as for a variety of activities and a certain circle of society.

He says: «the Feeling of happiness from the accumulation of material values is fleeting, and each time we get a reward less. Another thing is that when you buy a Ferrari, I get in the society such as refined connoisseurs of the brand, as I am».

The map says that one of the best experiences of his life — a flight on a MiG in Russia: «We were two times higher than passenger planes fly. The stars in the sky in broad daylight and the curved horizon is an incredible feeling.»

Most of us can’t afford flying a fighter plane or race a Ferrari, but the researchers suggest that the desire to collect a «collection of sensations» may explain why the craving for more modest entertainment, like spending the night in the ice hotel or ice cream with the scent of bacon.

Conspicuous consumption

Some people spend big money to showcase your success. The card says: «you Might want to show to others that you just made. I think that’s important, because I’m from a poor family, and I felt the need to show everyone that I’m now on the same level with them. But then, after some reflection, the need to impress you anymore».

Economic theory says that demand for most goods increases as prices fall. In addition, there is the so-called «Veblen goods» for which demand increases with price because they valued exclusivity.

Norton said: «overall consumption is a social event. With it, we rise above others. If my bottle of wine more expensive your means and I’ll better you.» However, he adds that people can emphasize their high status or standing out among others, or, conversely, trying to be inconspicuous.

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Elizabeth Currid of Halkett, Professor, University of southern California and author of the book «the Sum of small things. Ambitious class», says that wealthy Americans are buying less visible luxury items place designer handbags is an organic product.

She says: «Today wealth to a lesser extent mark social status. We live in an age of abundance, which means, things are not so rare and attractive as before. To justify the cost of the product, we need some history or a concomitant status.»

Happiness at the expense of others

In the end it’s simple: people are greedy for luxuries, because I believe that those will make them happy. Norton, one of the authors of the book «Happy money. The science of buying happiness,» says that the pleasure received in exchange for money, much more depends on how you spend it, than from what they left.

He said that spending money on things eventually cease to delight, and offers to spend money on a particular experience: «Most of us seem barely able to be happy by buying things.»

5 reasons why experiences bring more happiness than things

However, there is one way — research Norton prove that we are happier giving the benefit of others:

«It’s not that buying things we are not happy — of course, pleases, we because they and buy. The problem is that in the long run happier we become. It is quite another thing when we give them».

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