Signaling

  • December 6, 2018
  • by
  • Adam
Signaling

Brands matter. We might not like to admit it, but on account of societal pressure, materialism, insecurity, ego, or — simply — subjective tastes, brands really do matter. They can signal something important — both to ourselves and others. The importance we place on them is, at times, irrational; at other times — partly because of information asymmetry — brands serve a valuable purpose in signaling.

A funny example illustrating the premium certain brands can fetch came up last week. Payless, the discount shoe brand, set up a popup store in a chic mall. The boutique was branded as Palessi, after a fictitious Italian designer. Needless do say, social media influencers, hipsters, and contemporary rubes lined up to pay hundreds of dollars for shoes that sell at Payless for under 20 bucks.

Similar examples abound.

Musicians and experts have long touted the superiority of Stradivarius violins, but in blind comparisons, modern instruments win out.

In 1976, the Judgement of Paris occurred. In blind taste tests, French wines were pit against Californian wines — this being before the latter made a name for itself. At one point, a judge tasted a white and exclaimed, “Ah, back to France!” This particular wine was from Napa Valley. In the end, California won in every category.

A similar effect holds true even with placebos. Expensive ones work better.

I don’t understand everything that’s going on with branding and signaling, but one thing is clear: it sure is satisfying to see people talk up the twenty-dollar shoes they just spent hundreds on.

Adam Trone

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