Luxury goods prices are largely related to the cost of production in the form of quality rather than any other form of scarcity. The question they answer is 'wh

Luxury goods prices are largely related to the cost of production in the form of quality rather than any other form of scarcity. The question they answer is 'what is the very best product possible?' Luxury leather bags for example have a huge degree of craftmanship (which is why fakes are mostly lousy and very distinguishable). This is why they become a well-known brand in the first place - it's a mark of quality in design and production. Rimowa is an example where they have had to constantly innovate in order to maintain a quality edge. Service is another area - if you buy a Hermes silk tie, you can get it cleaned and pressed for life for free at any Hermes shop in the world (cleaning and pressing silk ties is incredibly hard and they often get destroyed by dry cleaners). The problem occurs when the brand itself becomes the cash cow as a result of this consistency in quality, and businesses start to exploit this. They will usually slap their brand on an outsourced production line product and charge a premium. Occasionally that might be justified by the product having a great distinguishing design to compensate but often it's not the case - and that's where we start to think of it as a bit of a scam. An example is Church's Shoes. From 1873, they were around the highest quality brogues in the world available at any price (short of bespoke shoes) and were handmade in workshops in Northampton. In the 1990s Prada bought them and started transferring production of all but a top end line to Italy, where the shoe manufacturing was partly automated and inferior. Unless you are buying the handmade bench grade shoes, you are now paying extra for the name and probably being a bit of a mug unless you are very attached to the particular design. Now that brand is tarnished for the high end shoe market and dependent on consumer ignorance for the rest. (As a sidenote, a lot of the craftspeople who worked for Church's before the takeover moved to the other Northampton shoe makers who used to be considered lesser quality and some of those brands are slowly moving into the luxury end as a result of the quality improvements.) I will very happily buy a nobrand or knockoff where there is no functional difference or the price tradeoff doesn't justify the difference, but often top end goods can justify their price.