The economic principle I will study is people generally respond to incentives in predictable ways.
The overall question I will research to help explore the economic principle is how do companies decide what price to sell their shoes at & why do consumers buy such expensive shoes?
According to Investopedia, there is a big difference between the cost to make shoes and what they sell at and limited supplies of new shoes endorsed by celebrities are generally overpriced.
First, "today's retail sneaker prices reflect an overall rise in manufacturing and marketing costs as sneaker companies compete to build and maintain brands desirable to their target markets." Celebrities and social media can change the price of sneakers. "Sneaker companies, such as Nike and Adidas, outsource production to more than 1 million workers in factories in China and other countries around the world." In 2014, Nike reported $28.50 as the general cost to manufacture one pair of sneakers and ship them to the United States. Nike's cost breakdown includes approximately $27.50 per pair for Chinese factory labor and overhead costs, plus $1 in shipping. Nike likes to make at least double what they spent on the shoes.
Second, people think by buying the most expensive shoes, they're getting the best value out of them. The average American man owns 11 pairs of shoes and the woman 17 pairs. The average pair of shoes for men is $65 and the average pair of shoes for women is $85. If you spend around the average price by $20, you're getting the best value.
Third, in 2015, Adidas signed a partnership with Kanye West to create Yeezy Boost sneakers. The sneakers, priced at $315, sold out within minutes of their February 2015 launch. When shoes first come out, they're a lot more expensive and it is better to wait for the prices to drop. When the sneakers are advertised by a celebrity, companies can sell the shoes for much higher prices. In the minds of people, they think it is worth paying that amount of money.
My next research question is what brand of shoes do consumers get the most value out of?
Third, in 2015, Adidas signed a partnership with Kanye West to create Yeezy Boost sneakers. The sneakers, priced at $315, sold out within minutes of their February 2015 launch. When shoes first come out, they're a lot more expensive and it is better to wait for the prices to drop. When the sneakers are advertised by a celebrity, companies can sell the shoes for much higher prices. In the minds of people, they think it is worth paying that amount of money.
My next research question is what brand of shoes do consumers get the most value out of?
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