Exclusivity Seeking

What it is

The snob effect is one of three effects Leibenstein set out in 1950, alongside the bandwagon and Veblen effects: demand for a good falls as more people consume it. Exclusivity seeking is the same motive described from the buyer's side.

Kenan Arifoğlu, Sarang Deo and Seyed Iravani used it in Marketing Science in 2020. Their model has strategic buyers who differ in how they value a good, who want exclusivity, and who can wait for lower prices. The goods are seasonal.

In effect

The authors describe three forces on a markdown. It can lower willingness to pay among buyers who want to feel unique, the snob effect. It can lead forward-looking shoppers to wait for lower prices, the strategic effect. And it can raise demand for a seasonal product, the sales effect.

When buyers strongly value exclusivity, the retailer may deliberately sell fewer units than demand, a buying frenzy that raises what people will pay. The counter-intuitive finding is that stronger exclusivity seeking can push the retailer towards markdowns rather than a single price, so exclusivity seeking is a separate reason for markdown pricing. Strategic behaviour by buyers does less damage when the buyers want exclusivity, but ignoring it can still be costly.

The article Why Luxury Brands Hold Their Prices places this next to the case for holding prices, as the clearest statement that the theory does not say never.

What it does not say

It does not say luxury houses do mark down for this reason. The paper is a mathematical model and reports no data.

It does not say markdowns are harmless. The snob effect is in the model as a cost.

It does not say the result carries over to goods that are not seasonal.

The paper was read here at the level of a repository abstract and a summary, and the full text was not seen. The page holds only what those two sources state.

Where it sits in the luxury pricing debate

The standard case for holding a luxury price runs in one direction: a markdown spoils the thing the buyer came for, which is that few others have it. Exclusivity seeking is that motive named. What the 2020 model adds is a reason the motive can also support a lower price later, and that is why it is worth keeping apart from the plain argument for never discounting.

The model's logic is a sequence. Early in the season the seller holds stock back, so that some buyers who would have paid cannot buy. That scarcity is what creates the frenzy, because buyers who want exclusivity value the good more when it is hard to get. Later, the seller marks down. The abstract does not say who buys at the lower price, so the order of events is all this page can state. The paper calls the three forces on a markdown the snob effect, the strategic effect and the sales effect.

How to read the evidence

The paper is a mathematical model. A model shows what follows from stated assumptions, and it is silent on whether real luxury buyers hold those assumptions. Three assumptions matter most here: that buyers are strategic and can anticipate the markdown, that they differ in how they value the good, and that the product has a selling season after which it loses value. A seller of watches or handbags that stay in the range for years may not fit the third.

The result is therefore best read as a counter-example to a universal rule. The rule says a luxury brand must never mark down. The model shows a setting in which a seller that cares about exclusivity chooses to mark down anyway, so the rule cannot be derived from the wish for exclusivity alone. Whether any house behaves this way, and whether it earns more by doing so, is an empirical question the model does not answer.

Questions the model leaves open

No study found for this piece followed real purchases of a luxury brand across different markdown policies. That gap is the one that matters for this concept. To test it, a researcher would need the sales of a house that changed policy, the buyers' later behaviour and some measure of how exclusive the brand seemed before and after. None of the six studies the article sets side by side supplies all three.

A second open question is timing. The model puts the markdown late, after rationing. If customers can see the calendar, they may learn to wait for the late price, which is the strategic effect the paper names and the long-run promotion literature describes in another setting. How much waiting a luxury house can tolerate before the early frenzy fades is not something the abstract reports.

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