Do consumers pay more for good-looking products?

July 24, 2001

Free Market Foundation

Manufacturers have at least two incentives to make their products more attractive: by appealing to consumer tastes they hope to best their competitors, and consumers might be willing to pay more for products that appeal to them, thus increasing profits.

But economists find it most difficult, if not impossible, to quantify just how much style, colour or feel are worth.

Lately, everyone from industrial designers to city planners claims to be attending to consumers’ aesthetic interests and there is ample anecdotal evidence that, on the margin, people do put a higher premium on the look and feel of things than they once did.

Obviously, competition spurs the quest for aesthetic appeal and manufacturers who can offer it without increasing costs or prices will be the successful ones, all other factors being equal.

Increasing the surplus of value minus cost is where both higher living standards and higher profits come from, economists remind us.

The recent demise of Apple Computer’s Power Mac G4 Cube illustrates the difficulties of balancing style with consumers’ attention to price. Barely a year after Apple introduced the tiny, elegant computer, the company noted that it wasn’t selling well and cancelled it. Perhaps the price which could easily top $3,000 turned out to be a more important consideration with consumers than its high style.

Source: Virginia Postrel (Reason magazine), Economic Scene: Can Good Looks Guarantee a Product’s Success? New York Times, July 12, 2001.

For text http://www.nytimes.com/2001/07/12/business/companies/12SCEN.html

For more on Consumer Standard of Living http://www.ncpa.org/pd/economy/econ2.html

FMF\17 July 2001