Luxury good

Fig. 1: Classification of goods according to demand behavior with changes in income.

A luxury good is colloquially a class of goods that a consumer perceives as a luxury or in economics (and especially in microeconomics ) a class of goods whose demand increases disproportionately to the increase in income as income increases. The opposite is the cheap range .

General

The colloquial definition contrasts luxury goods with the concept of luxury, which is also represented by the economist N. Gregory Mankiw . A large number of economists establish the relationship between luxury goods and income and demand.

Regardless of the definition, luxury goods are subject to the high price strategy of their providers. With regard to the price level and the relationship between income and demand, there are three economic classes of goods, namely inferior goods , normal goods and luxury goods. In the case of inferior goods, rising incomes even lead to falling demand, with normal goods the demand grows disproportionately or proportionally to income, with luxury goods the demand increases disproportionately. Normal and luxury goods are also called superior goods , because demand for both is increasing. There is, however, no uniform opinion in the specialist literature about these delimitations. Normal goods serve the basic supply ; Their demand is initially very high, but saturation occurs very quickly ; only then does the border to luxury goods begin.

history

The main characteristic of the first luxury goods of antiquity was their natural scarcity . That is why precious metals such as gold or silver were among the luxury goods for the elite . Some historians also count olive oil among the ancient luxury goods. The Nabataeans controlled a large part of the Frankincense Route , on which frankincense and other luxury goods were transported from southern Arabia to the Mediterranean Sea to the port of Gaza . For the Romans , pepper was the most important condiment, they also used cloves and ginger to refine meat dishes. In the 7th century BC, seafarers and traders brought exotic luxury goods from the Orient and Africa to Etruria , where they were widely sold . Porcelain, silk and tea also had to be brought to Europe from overseas, and silk in particular was considered a “prestige good”. From her the Roman philosopher Seneca reported about 64 BC in his work "About Beneficiaries " ( Latin De beneficiis ) bitingly that the ladies "don't even show their adulterous lovers more of themselves in the bedroom than in public."

The main buyers of luxury goods in the Middle Ages were primarily the royal or noble courts . The trades operated by merchants specialized in long-distance trade in luxury goods . The demand for scarce spices in late medieval Central Europe was so great because it was limited to a small upper class, so that cloves ( Moluccas ), ginger , nutmegs ( Banda Neira ), pepper and cinnamon were definitely luxury goods. The price of pepper, one of the most coveted luxury goods in the cities and in the country, fell in 1607 in Augsburg and Vienna (in Vienna from 112.5 kreuzers per pound in 1600 to 45 kreuzers in 1607).

In the 17th century, mercantilism concentrated, among other things, on the theory that prosperity would arise in one's own country if the export of luxury goods increased, but imports were reduced and money would remain in the country. In March 1698, Frederick I introduced the wig and body tax , a luxury tax for the first time , which was abolished in November 1717. Likewise, the dog tax that still exists today in Prussia was first initiated as a luxury tax in 1810. In the same year, Tsar Alexander I imposed high import duties on French luxury goods . In May 1902, Kaiser Wilhelm II introduced the sparkling wine tax as a luxury tax; it still lives on today as a sparkling wine tax . David Ricardo stated in 1817 that "Taxes on those goods that are usually viewed as luxury items are only charged to those who use them."

species

Among the luxury goods in particular goods are exclusive brand name with high-price strategy ( "luxury brands") as the fashion label of haute couture (about Hugo Boss , Pierre Cardin , Christian Dior , Yves Saint Laurent ), accessories ( Gucci , Louis Vuitton ), luxury watches (such as the brands Breitling SA and Rolex ), objects of daily use such as cars ( Ferrari , Lamborghini , Mercedes-Maybach , Rolls-Royce Motor Cars ), collector's items ( antiques , stamp collections , works of art , coin collections ), high-priced food or luxury goods ( champagne , delicacies such as caviar or truffles ) , Household items ( Christofle , Poggenpohl , Rosenthal , Villeroy & Boch ) or luxury apartments . Safe investments are luxury goods and not basic needs. The high price arises either from an artificial scarcity ( e.g. Hermès ) or from the high price strategy ( Bally ). The high-price segment in gastronomy includes luxury hotels or the "star gastronomy" awarded by the Michelin Guide .

Legal issues

Luxury goods are always subject to attachment . Even if they to § 811 para. 1 no. 1, 5 and 6 ZPO as exempt from attachment apply, they may according to § 811a ZPO by way of exchange of seizure by provision of an intended use sufficient replacement part be seized (replacing a Rolex of 16,000 euros against a Swatch from 30 euros). Objects that cannot be seized according to § 811 Paragraph 1 No. 1, 5 and 6 ZPO are objects for personal use, household effects or items used for professional or gainful employment. In some states a luxury tax is levied on certain luxury goods (such as Denmark or Finland ).

economic aspects

Luxury goods are not “demand products” that solve a rational problem . Rather, they are “products on offer” that create a sensual world of experience, offer emotional solutions and make a dream concrete. They also act as status symbols that signal social status , even when there is no authority , as is the case with impostors . Buyers for luxury goods also pursue the goal of buying these goods to stand out from the crowd of other consumers and to demonstrate a certain lifestyle . Luxury goods do not represent a property of these goods, but rather the market behavior of some market participants with certain preferences in certain income situations . For example, a student living on BAföG will satisfy his hunger with junk food , but later, as a member of the board of a large company , will dine in the "star restaurant".

The selection function of the price means that when the price level is high, there are predominantly demanders whose income or assets are not significantly reduced by the payment. The most important target group are therefore income or wealth millionaires . Luxury goods meet this need for luxury . They form a market segment in which the consumer behavior differs from, for example, cheap products. If incomes rise, consumers switch to higher-quality or more expensive substitute goods . The follower effect describes the personal goal of a minority of market participants to appear to belong to a certain prestige group through the consumption of certain luxury goods. That is why there are also market participants in this market segment who are not among the wealthy. On the other hand, offers with low prices are attractive to poorer groups of buyers. The high product quality and low obsolescence increase of luxury goods, the cost of the provider; a low purchase price is not planned anyway.

In terms of income elasticity , luxury goods are positive, i.e. completely elastic: ${\displaystyle \eta _{i}}$

${\displaystyle \eta _{i}>1}$,

so that with increasing income the demand grows disproportionately. Conversely, demand falls disproportionately during recessions , making luxury goods vulnerable to economic trends in terms of income elasticity. By the usual representation with the Marshallian demand ( ) for a good as a function of the prices of all goods and the household income ${\displaystyle x_{i}(\mathbf {p} ,y)=x_{i}(p_{1},\ldots ,p_{n};y)}$ ${\displaystyle i}$ ${\displaystyle n}$ ${\displaystyle y}$

${\displaystyle \eta _{i}\equiv {\frac {\partial x_{i}(\mathbf {p} ,y)}{\partial y}}{\frac {y}{x_{i}(\mathbf {p} ,y)}}}$

A good only becomes a luxury good if the income elasticity is greater than 1. The price elasticity can be high to very low, so that the - financially strong - consumers do not or hardly react to price changes. No immanent saturation limits are recognizable for them. Theoretically, luxury goods have a high price elasticity of demand, “necessary goods”, on the other hand, have a low price elasticity of demand. Luxury goods are therefore more cyclical, so that demand for them hardly weakens even in the recession. With the Veblen effect , the demand for luxury goods continues to rise despite the price increase. Since there are only a few target groups for luxury goods, they are usually offered on a class market.

The question of whether luxury consumption can be reduced through luxury taxes is difficult to answer. On the one hand, according to the neoclassical theory, taxation leads to a price increase (by being passed on to the end customer) and thus to a market equilibrium with lower sales. While some authors see this connection also for luxury taxes, other authors see no steering effect: On the other hand, the benefit of the luxury good is that it is so expensive that not everyone can afford it. This means that price increases do not necessarily lead to a reduction in demand : the status of the buyer increases with the purchase because the luxury good has become more expensive, and demand increases with it.

literature

• Friedrich Breyer: Microeconomics. An introduction. 5th edition. Springer, Heidelberg a. a. 2011, ISBN 978-3-642-22150-7 .
• Hal Varian : Intermediate Microeconomics. A modern approach. 8th edition. WW Norton, New York and London 2010, ISBN 978-0-393-93424-3 .

Web links

Wiktionary: luxury goods  - explanations of meanings, word origins, synonyms, translations

Individual evidence

1. ^ N. Gregory Mankiw / Mark P. Taylor, Grundzüge der Volkswirtschaftslehre , 4th edition, Schäffer-Poeschel, Stuttgart 2008, ISBN 978-3-7910-2787-6
2. ^ Johannes Natrop, Grundzüge der Angewandte Mikroökonomie , Oldenbourg, Munich 2006, p. 82, ISBN 978-3-486-71315-2
3. ↑ Friedrich Breyer, Microeconomics: An Introduction, 2011, p. 143
4. ↑ Susanne Wied-Nebbeling / Helmut Schott, Fundamentals of Microeconomics , Springer, Heidelberg a. a. 2007, p. 48, ISBN 978-3-540-73868-8
5. ^ Alfred Endres / Jörn Martiensen: Microeconomics. An integrated presentation of traditional and modern concepts in theory and practice , Kohlhammer, Stuttgart 2007, p. 320, ISBN 978-3-17-019778-7
6. ↑ Susanne Wied-Nebbeling / Helmut Schott, Fundamentals of Microeconomics , 2005, p. 49
7. ↑ Susanne Wied-Nebbeling / Helmut Schott, Fundamentals of Microeconomics , 2005, p. 49
8. ↑ Horst W. Opaschowski, Freizeitökonomie: Marketing von Erlebniswelten , 1995, p. 29
9. ^ Ariel Lewin / William HC Propp, Palestine in der Antike , 2004, p. 168
10. ↑ Eberhard Schmitt, Überseegeschichte: Contributions from younger research , 1999, p. 207 FN 4
11. ↑ Peter Kranz / Ulla Kreilinger / Eva Heidebroek-Soldner / Georg Pöhlein, Antikensammlung Erlangen: selection catalog , 2002, p. 39
12. ↑ Seneca, De beneficiis , around 64 BC. Chr., 7, 9, 5
13. ↑ Gerhard Dilcher, Market Law and Merchant Law in the Early Middle Ages , in: ders. (Ed.), Citizenship and City Constitution in the European Middle Ages, 1996, p. 11
14. ↑ Eberhard Schmitt, Überseegeschichte: Contributions of the younger research , 1999, p. 207
15. ^ Wilhelm Abel, Agricultural crises and agricultural economies: A history of the agriculture and food industry in Central Europe since the High Middle Ages , 1978, p. 154
16. ↑ Uwe Schultz, Versailles: Die Sonne Frankreichs , 2002, p. 47
17. ^ Karl Braun-Wiesbaden, From Friedrich the Great to Prince Bismarck , 1882, p. 24
18. ↑ Heinrich August Winkler, Geschichte des Westens , 2009, o. P.
19. ^ David Ricardo, Principles of Political Economy and Taxation , 1817, p. 231
20. ↑ Kenneth J. Arrow , The Theory of Risk Aversion , in: ders. (Ed.), Essays in the Theory of Risk-Bearing, 1971, p. 103
21. ↑ Miriam Büttner / Frank Huber / Stefanie Regier / Kai Vollhardt, Phenomenon Luxury Brand , 2006, p
22. ↑ Joachim Hurth, Applied Trade Psychology , 2006, p. 90
23. ↑ Hans-Peter Liebmann / Joachim Zentes, Handelsmanagement , 2001, p. 496
24. ↑ Steffen J. Roth, VWL für Einsteiger , 2016, p. 64 f.
25. ↑ Britta Korneli, International Brand Management of Luxury Brands , 2012, p. 9
26. ↑ Michael Jäckel (ed.), Elmar Lange: Ambivalenzen des Konsum und der Werblichen Kommunikation , 2007, p. 143 f.
27. ↑ Artur Woll, General Economics. 13th edition, 2000, p. 119
28. ↑ Hans-Lothar Merten, Art and Luxury as Capital Investment , 2014, p. 9
29. ↑ z. B. Norman J. Ireland: On limiting the market for status signals . In: Journal of Public Economics . tape 53 , no. 1 , January 1994, pp. 91-110 , doi : 10.1016 / 0047-2727 (94) 90015-9 .
30. ↑ z. B. Giacomo Corneo, Olivier Jeanne: Conspicuous consumption, snobbism and conformism . In: Journal of Public Economics . tape 66 , no. 1 , October 1997, p. 55-71 , doi : 10.1016 / S0047-2727 (97) 00016-9 .

Please note the information on legal issues!