3.14 Signaling Theory

When do we diverge? When choices signal identity (observability, functional benefits, etc.)

People diverge to signal identity, which based on:

  • Observability
  • Functional benefits

“The more costly something is, the more likely it is to retain its value as a clear and accurate signal.” (Berger 2016) Costs in this case could be:

  • Monetary
  • Opportunity
  • Time

Price and branding (brand prominence) has an inverted-U relationship The higher the price is, the more brand prominence it possess. However, for the ultra rich class, the highest price does not command highest brand prominence, but actually lowest brand prominence. (a small set of ultra rich people know)

“The identity-signaling drives things to both catch on and die out… Counterfeiting helps speed up the process”

Counterfeit and piracy are good because it keeps consumers crave for a new one (Berger 2016)

We know that the mere exposure can increase our preference towards an object. Interestingly, the similarity between a new object and one that we are familiarity with also have the same effect. Novel but don’t be too novel.

References

———. 2016. Invisible Influence: The Hidden Forces That Shape Behavior.