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Showing posts from September, 2019

Haute Horology: Breaking the Law (of Demand)

In prior articles I have discussed the unorthodox role of prices in luxury watch markets. For example, since watches can serve as a highly convenient source of portable liquidity, when prices go up the liquidity benefit from a watch is greater because you can carry around more value on your wrist. This means that, at least along one dimension, buyers might be more inclined to buy a watch as prices go up.

The watch market, then, serves as an exception to the prevailing notion that as a product gets more expensive people buy less of it, otherwise known as the law of demand (a law which tends to hold for almost any product). In this article I will explore additional reasons why the law of demand doesn't apply to luxury watches and, further, show that many features of the luxury watch market can be explained by nontraditional consumer behavior. Fair warning: I have steered clear of the math which we economists use to investigate markets but that will have to end here. I will re…