Luxury Is Built By Throwing Money

As a special type of goods produced under certain economic and social developing conditions, luxury is an objective, inevitable commodity and social phenomenon in social hierarchy. The development of science and technology and the enhancement of consumer tastes, establish a solid relationship between market supply and demand for the development of luxury economy. As an important part of modern commodity economy, luxury has made an important contribution to promoting economic development and social progress. But the high price, the conspicuous consumption patterns, had caused a lot of adverse effects to the social life.High prices have always been regarded as one of the essential attributes of luxury. Luxury can not only sold by the price of multiple even decuple times of the price of the similar goods, the change in market price has always take its place before the currency shift and consumer purchasing power. Especially in China, the expensive phenomenon is particularly evident, the difference of price in China and abroad spread up to70-80%, why can the luxury goods make the price so high? What are the reasons that the difference of price is so huge? Those questions will be answered in this essay. The price of luxury caused a lot of concern from academics and business, but the research angle of luxury prices has always remains in the cost or value, which think that the pricing of luxury is cost-based or value-based. The theory well above reflects the relations of price and various internal factors of the market, reveals the formation process of luxury price to some extent, but did not analysis the causes of the price in-depth, which is driven by the status effects. Therefore, it is not sufficient to reveal the operating mechanism of luxury market, which has become a barrier to research luxury economy. In this situation, the operating mechanism and the pricing mechanism of luxury market needs further investigation, the underlying causes of high and increasing prices of luxury good need to be revealed, which is the focus of this article to study.This paper study the operation mechanism of luxury economics based on contest theory, trying to explain the high-priced phenomenon from market positioning. Luxury, as a commodity produced in social hierarchy, have a strong class identity. By operation of companies, the identity not only gained social recognition, but also become a symbol to distinguish the status of consumers through consumption behavior. In this case, in order to meet consumer psychology of conspicuous consumption, companies will continue to throw money to maintain and improve the rank of luxury in the minds of consumers, in order to make high price. And the competition between luxury companies has become a status ranking race. The pricing process is also a means to upgrade its status in the luxury hierarchy. This is part of the reason why the price of luxury is high and increasing. In addition, the article also reveals the transformation process of luxury becoming a mass-marketed product, which reveals the nature of luxury.To help this study, this paper particularly focuses on studying the problem of high-priced luxury goods in China. The time that luxury enter into Chinese market is very short, and the rising of the new wealth make China’s luxury consumer is still in the primary stage of conspicuous consumption. The irrational consuming attitudes let consumer think that "only expensive is good", making high-priced luxury features especially prominent in China, which would adversely affect the development of China’s economy in the long run. On the basis of the model analysis, this paper explained the reason why Chinese luxury prices is so high:the conspicuous consumption psychology of domestic consumers, the missing of local luxury brands, the huge profits of Chinese market leading to China’s luxury market ranking competition is fierce, which led to China’s luxury market price is extremely high. Based on the Theoretical analyzes, this essay also put forward several suggestions to improve the high prices of luxury.The structure of this paper is organized as follows:(1) Introduction section. By introducing the changes of luxury prices and luxury consumption, this essay comes p with some thoughts on the price. As a starting point for the in-depth analysis of xury prices, combined with previous studies, this paper put forward some possible ovations.(2) Theoretical studies on luxury prices. By analyzing the symbols role of luxury, propose a new perspective for the analysis of price theory.(3) Contest theory. Through this part, tell the readers about contest theory to provide technical support for the next analysis.(4) The model. By constructing a mathematical model to simulate the status contest process of luxury companies competition, and analysis the effects of each race microscopic factors on competition.(5) Focuses on the price of China’s luxury market, and explains why luxury in China is so high?(6) The last chapter will come to an conclusion and advice for the government regulation.This paper is one of phased achievements of Natural Science Foundation of China called "Research for the mechanism, effect and regulatory issues of the ’draft’ competition in society"(project approval number:70973014).