What Determines a Louis Vuitton Bag’s Price?

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Apart from the variables mentioned above, through value perception, reinforcement and punishment also play an essential part in influencing a customer’s buying behavior. In microeconomics, the Utility theory suggests that customers make judgments on a product’s utility, and then compare it to the value of the money i.e. the price of the bag he/she has to pay, and if the perceived benefits exceed the perceived costs, the customer is more likely to make the purchase decision. If utility theory is considered, in reality a customer recognizes the value of the bag based on the utilitarian and informational reinforcement. Describing it from a customer’s point of view, the perceived benefits of that particular Louis Vuitton bag has two parts; the usage value, known as utility, and the second part is given to the social status value that is signified by the informational reinforcement (Du, 2009). This is how utilitarian reinforcement affects the price of luxury goods like a typical LV bag.

To sum up, it’s not only one variable that affects the price of a product, especially when it’s a luxury product. To understand the pricing of a luxury item, the whole mechanism behind it should be understood first and also how much the price of a luxury good relies on the utilitarian reinforcement. The brand name itself is one of the most important determinants of the price of a good, and while determining the price of high-end branded products, brand equity always plays an important role.

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Bibliography

Badenhausen, K. (2013, November). World's Most Valuable Brands. Forbes.

Du, Q. (2009). The Pricing of Luxury Foods: A BPM Approach. International Journal of Business and Management.

Wolinsky, A. (1987). Brand Names and Price Discrimination. The Journal of Industrial Economics.