A Theory of Minimalist Luxury

67 Pages Posted: 10 Oct 2018 Last revised: 15 Oct 2020

See all articles by Z. Jessie Liu

Z. Jessie Liu

Johns Hopkins University - Carey Business School

Pinar Yildirim

University of Pennsylvania - The Wharton School

Z. John Zhang

University of Pennsylvania - The Wharton School - Department of Marketing

Date Written: September 16, 2018

Abstract

In this paper, we study theoretically how luxury goods can signal wealth in the presence
of high-quality, low-price counterfeits. We show that when high-quality, low-price counterfeits
exist and are visibly indistinguishable from the authentic products, the classic Veblen thesis
breaks down where the wealthy outspend the rest through conspicuous, excessive consumption
to stand out. Instead, the wealthy may embrace “less is more,” or what we refer to as minimalist
luxury to signal their status. More specifically, the wealthy may purposefully restrain from
consumption of luxury goods, motivated either by market forces or by difference in consumer
preferences, to separate themselves from the mimickers. In other words, “less” is more effective
than “excessive” in signaling wealth. We derive this minimalist luxury equilibrium and explore
managerial implications of the mechanism through which this equilibrium occurs.

Keywords: Luxury Branding, Signaling Games, Emerging Markets, Marketing, Pricing

Suggested Citation

Liu, Zhenqi and Yildirim, Pinar and Zhang, Z. John, A Theory of Minimalist Luxury (September 16, 2018). Available at SSRN: https://ssrn.com/abstract=3246729 or http://dx.doi.org/10.2139/ssrn.3246729

Zhenqi Liu

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

Pinar Yildirim (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Z. John Zhang

University of Pennsylvania - The Wharton School - Department of Marketing ( email )

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