What defines it?
This increase in prices of phones helps to beg the question, if the prices we pay for goods are rational. What makes it rational? Should we be paying just enough to cover costs and provide a little profit to those who are providing it or should it just be given the ideal of “Well if you want to buy if you will pay the price if not then don’t bother? To me price can be seen as a quantitative value given to objects to help society rank on how much it is worth. My hypothesis on why some things that have the same function as other are worth more just because of the status it brings with it. With this in mind it leads me to the conclusion that the prices we pay for goods are not rational.
Status is attached to the irrational side of us. If status was rational then we would not long for the prestige of higher classes. As humans we want to of course be viewed as the best. No one wants to be poor or longs for that. So having something that is expensive is something that is necessary. This is known as social stratification. This dictates that people in society need to live to certain standards that are set by society. So when you have someone who is rich it is expected of them to have a mansion, expensive cars and everything with a really nice price tag on it. It’s not expected of someone with a high status to pick something off the clearance rack at Walmart. The reason why things can be priced a certain way is based upon what society deems fit. This whole society deeming fit of certain things can be seen as a negative social incentive. If you do not get that really expensive Michael Kors bag even though are rich people of that class with shun you and see you as inferior because you do not flex as much as you should. As economist John Harsanyi, states that
“apart from economic payoffs, social status seems to be the most important incentive and motivating force of social behavior.”
Because of the social incentive of buying something with a higher price tag and this incentive people just cave into longing for the prestige instead of getting whats necessary.
This doesn’t make it rational. If the prices we paid for goods were rational I believe things would be on a level playing field because we would be looking at the function of the product and not the status and the extra bells and whistles (not including what deals with performance). For example if you have the same car why is it fair to pay more for a different color? Should it not be the same? I feel that it would be rational to pay for the same car but in a different color. The color should not dictate the price, the function should and because of that it is not rational.
With all this information stated above it also helps to beg the question if something can be overpriced and to that I say yes. Overpriced I feel it a term that is in the eye of the beholder something that I would find overpriced might not be the same of what someone else finds overpriced. Because people are not rational we cannot assume that every mind works the same. So when it comes to overpricing one person could take it differently than someone else. If someone lacks the influx of funds they will be more cautious then someone who has a wad of cash laying around.
Some companies can also get away with selling absolute nonsense. This is to do with branding. If a company is seen as something that is associated in having higher social prestige they can sell things that are outrageous for things that are not even worth. For example the company Supreme sold a brick for $30. Because of the status associated people were dying to get their hands on this brick. So after they ran out people were selling their bricks for around a whopping $1000.
At the end of the day price is going to be something that society is going to have to deal with it whether is rational or overpriced. It represents what we as society value and what is associated with the rich and the poor!