Customers often value a good more when its price goes up. One reason may be its signaling value. An expensive handcrafted mechanical watch may tell time no more accurately than a cheap quartz model; but, because few people can afford one, buying it signals that the owner is rich.
Interpretation
Higher prices can increase perceived value due to their exclusivity.
This quote by Raghuram Rajan highlights the psychological phenomenon where consumers tend to value products more when they are priced higher. It emphasizes that an object’s price can act as a signal of quality or status, illustrating how a luxury item, like an expensive watch, carries more perceived value not solely based on its functional benefits but also on the social status it conveys to others.
In practice
This quote can be used in a marketing presentation to illustrate how brand pricing strategies can influence consumer behavior.
The U.S. should worry about the effects of its polices on the rest of the world. We would like to live in a world where countries take into account the effect of their policies on other countries and do what is right, broadly, rather than what is just right given the circumstances of that country.
The problem with forbearance is that it always looks like a good thing to do until it stops working.
Perhaps the hardest challenge has been to persuade the public, impatient for rapid growth, of the need to ensure stability first. Growth, it is argued, is always more important, regardless of the looming economic risks.
Too many years away from academia renders you pretty incompetent at research and teaching. So I had to go back.
The gap in India has always been between the promise and the execution.
Democratic accountability means that governments must be popularly accepted, with citizens empowered to replace corrupt or incompetent rulers.
The truth of good economic doctoring is to know the general principles, and to really know the specifics. To understand the context, and also, to understand that an economy may need some tender loving care, not just the so-called hard truths, if it's going to get by.
While it won't solve all the world's ills - and ideas such as a rent cap and more social housing are necessary in places where housing is scarce - a basic income would work like venture capital for the people.
The world needs banking but it does not need banks.
Citigroup, Bank of America, and JP Morgan Chase should not be permitted to charge consumers 25- to 30-percent interest on their credit cards, especially while these banks received over $4 trillion in loans from the Federal Reserve.
In financial terms, my sense is that the distribution of wealth, unequal as it is, is self-perpetuating, and, especially in a linked and accelerating world, the rich get ever more quickly richer while the poor get ever more speedily poorer.
I think economics - and this is what I've tried to impart - has a tremendous amount of human interest in it.
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