It follows from questions Q-Q of the interview that the price defines the current value of the object auctioned. The process of accepting or amending the price seems to be, at least to an extent, both irrational and random. How much irrational or how much rational is that process? To answer this question, we have to elucidate the nature of value.
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In philosophy, the study of value is called axiology, derived from the Greek – (worth), and – (the knowledge of). Axiology was developed a century ago, mainly by Paul Lapin (1902) and E. von Hartmann (1908). It focuses on two kinds of “values”: aesthetics and ethics. The former studies what beauty and harmony are, while the latter puts emphasis on what is wrong and what is right in the social conduct of individuals. A mathematical approach to this topic, resulting in formal axiology, is the brainchild of Robert S. Hartman (1967). Hartman’s contribution is unique in the sense that his Formal Axiology is the only social science in which a one-to-one relationship exists between the dimensions of axiology and mathematics.
If axiology is viewed as a collective name for aesthetics and ethics, it is similar to value theory. The latter teaches about the value of things. A thing in this context may be anything: an object, a person, or an idea. The study encompasses what people value, how they value it and why they value it. The results may be slightly different in the fields of philosophy, psychology, economics, or sociology.
In the realm of psychology, value theory is applied to the study of how people are affected by their values. The object of study is how people develop a set of values, and how they subsequently profess and believe in these values. Even more important is how people act or fail to act on their values.
The answer to the question how human behaviour may be guided, fail to be guided or be misguided by a set of values, or why people choose or prefer some things to others, or why and how certain values emerge at different stages of human physical and intellectual development, has not been found yet.
Human beings are social animals and as such animals, they congregate in groups and communities. Each group or community may have its own values, usually different from the values and priorities of another community. The community values interact with personal values. The nature of the interaction and its impact on personal values or their change is the subject of sociological studies. Among prominent scientists who studied these topics, viewing value as an independent variable, we find Max Weber, Jürgen Habermas, or Émile Durkheim.
Returning to the axiology view, the value can be viewed as relations between subjects and objects. Through these relations, the social, group, or individual evaluations of certain material, human or natural qualities are expressed in hierarchical and polarised forms. These forms fill ideals, needs, or desires adapted to the time and space in which they occur. Three levels can be distinguished in the determination of their essential type. They can be studied on the pragmatic level (Why?), on the syntactic level (How?), and on the semantic level (What?). Value is multidimensional: (more BS, p.1)
For this purpose, Nadine (2003) defines an axiological system S = (M, ï“, I), where
M is the class of representative structures,
ï“ is the class of interdependent objects or other entities
I is the class of interpretations (assignments) given to the structures.
The system S can function in a number of ways, and subsystems can be associated to it. A complex axiological system may thus be generated. Nadin (2003) has derived the following operations and relations can be established between any two axiological systems S1 and S2:
- S1 is the subsystem of S2
- S1 is complementary to S1
- S1 and S2 are equal
- Union of S1 and S2 exists
- Intersection of S1 and S2 exists
- An empty system exists
- S1 and S2 are independent
Similar relationships can be defined for the predicates. Nadine has also shown the categories and morphisms of the systems mentioned.
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The term “creating value” has an aura of mystery about itself. How do we “create” value? And, indeed, what is “value”? And how does it relate to luxury? These are the important questions that will be addressed in this chapter. A product attains the status of luxury good because of its unique intrinsic properties, such as design, performance, durability, quality and reliability. At least some of these properties must be perceived as considerably superior to comparable common substitutes.
The term value has been treated extensively in philosophy, as well as in economy. In spite of this, or perhaps because of it, there is no unified definition of value. There are definitions appropriate for the respective perspectives of value. Therefore, creating value may seem a sheer contradiction.
The first approximation to understanding value is the realization that in many instances value is time, space and person dependent. For instance, Arabian horses were very valuable as recently as a century ago. But they were appreciated mainly by the male population, and only in those social circles that could afford owning an Arabian horse. Nowadays, with the car being the king of the road, owning a horse, even the most extraordinary one, is not a matter of prestige.
This simple example illustrates that value is a perceived property. Its model necessarily must comprise at least some of the value categories: emotional, economic, and social. Among the components of the emotional category, most outstanding are beauty, durability, exclusiveness, and perhaps also a sense of belonging caused by the high cost of luxury. Each of these dimensions is complex enough to be scrutinized separately.
Some people believe that beauty, whether in humans or in nature, obeys a mathematical law. Based on countless observations, it can be stated that living organisms, plants, animals, or human beings, grow according to a precise mathematical law given by the geometrical ratio of 1:1,618. It is called the Golden Ratio, or the Divine proportion, obtained by a precise mathematical procedure. Two quantities are in the Golden Ratio if their sum divided by the larger quantity is equal to 1,1618 (its reciprocal is 0,618). It is based on the Fibonacci Sequence, in which each member is a number obtained as the sum of the previous two number. By and by, any successive pair of the Fibonacci series will result in the ratio mentioned, called Î¦. The interesting observation is that this ratio, Î¦ = 1:1,1618, appears consistently in beautiful things – in nature, architecture, the arts, or living beings. Many beautiful pictures illustrating the Phi, as well as explaining the secrets of the Golden Ratio, can be found at the Golden Ratio website.
The logos of Atari, Nissan and Toyota, obeying the Golden Ratio law, the metric dimensions of paper formats, shells, credit cards, architectonic drawings, too, can be found at the Golden Ratio website.
Some time ago, the press reported that Dr Marquardt, a facial surgeon from California, had constructed a mask of the human face based on Î¦. This beautiful face displays the proportion everywhere: in the skull, the positioning of the eyes, the length of the nose, or the size of the teeth. The mask conforms to today’s standards of beautiful faces, regardless of race. Moreover, it also agrees with pre-modern paintings, antique statues, or old-time movie stars. This might lead us to believe that facial beauty is invariant over time and across cultures. Is it then not tempting to conclude that beauty, quantified by a mathematical ratio, is not remarkable at all, that beauty is the property of the visible “surface”, and that philosophizing on what beauty means is a waste of time?
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Perhaps not quite yet. Beauty, indeed, is in the eyes of the beholder, but it goes beyond physical attractiveness, so intensely blared by the media and popular culture. Beauty in the context of luxury includes also authenticity, kindness, wisdom, happiness, love, dignity, and self-realization. The possibilities for the beautiful to be known have thus been extended infinitely. Because luxury may very well depend on this kind of “beauty” – derived not only from physical objects, but also from human interaction perceived as valuable to a specific individual. Again, beauty is in the eyes of the beholder.
Durability, too, may have a great many meanings to different individuals. A general dictionary definition (Merriam-Webster, website) states that something that is durable is able to exist for a long time without significant deterioration. These terms are technical because, indeed, durability is most often of interest to engineers and businessmen. It refers to unchanged properties or performance of a product with reference to some environmental or application-related conditions. Most often, durability of industrial products is achieved or enhanced by a proper choice of materials, clever design, and surface treatment.
Durability may be a preferred property of objects including luxury objects. For instance, gems or precious metals are durable. The durability is given by their resistance to environmental influences, which is an inherent property of these materials. Durability is further corroborated by their aesthetic features. Non-objects, for instance luxury holidays, or sumptuous meals, can hardly be durable longer than what is acceptable, which is a relatively short time.
Exclusiveness is a perceived property per se, but it may also be viewed as a component of durability. Exclusiveness is predominantly a product of craftsmanship applied to luxury items. This is what gives a luxury item a “life”. A mass-produced item, no matter how beautiful, lacks the touch of the spirit of its creator, and never makes the same impression as a hand-made object. Personalized production, combined with exquisite design, makes luxury objects invariant in time, and resistant to fashion fluctuations.
Because luxury items are not available to everyone, the narrow segment of the population that can afford them makes up a virtual club. The sheer belonging to the club tickles many people’s imagination about the social status or importance they acquire if the public associates them with the exclusive club. It may or may not be so.
The economic aspects of luxury seem to be simple to grasp. Luxury costs a lot of money. That is the simple conclusion most people would be tempted to draw. The actual relationships holding between luxury objects and their users are, however, vastly more complex.
In the realm of economics, human beings are viewed as consumers. Their revealed preferences for various goods are considered indicators of the fact that those goods are of value. Self-evident as this statement may sound, it generates a contradiction between various political or religious influences, and a struggle over what goods should be available on the market. Market goods must be owned, if the market system is to provide information on the consensus on certain essential questions concerning individual and society, and the ecosystems affected by the market transactions.
The term “market goods” is too constrained, as the taxonomy of goods is much more complex. First, a distinction has to be made between moral and material goods. Moral goods is anything a person is expected to be morally obligated to strive for. The study of this kind of goods belongs to the realm of ethics. People and their conduct may thus deserve praise or blame in a given system. Natural goods is any kind of goods that is palpable. The discipline that deals with natural goods is economics. Luxury goods, too, are natural goods. A complement to this is the distinction between moral and non-moral goods. A non-moral good is something that one or more individuals desire. A non-moral good may include moral goods, but includes predominantly material goods.
There is a mental distinction between these two views of goods. If one says: “Fred is a good pianist”, and “This meal was very good”, the meaning of the qualifier “good” is not interchangeable. It has a different sense: “accomplished” in the former case, and “delicious” in the latter. Another important distinction is that between economic goods and moral goods. The former is anything that stimulates economic growth. So, for instance, alcohol has an exchange value in that it stimulates economic growth. Thus, alcohol is economically good. Since there are circumstances when it may be harmful to a person’s body, and even have a negative social effect, alcohol can hardly ever be regarded as a moral goods.
Several other taxonomies exist. To value, in the realm of goods, means to determine an essential type of goods, decide that things are in some relation to each other, and that one thing is better than another. Thus, to value is to prioritize. Valuations in the sense of assigning higher value to some things and lower value to other things, is a consistent pattern of deciding what is “good”. Being a person’s manner of thinking, it is strictly individual.
The manner in which a person reaches conclusions about things, and the unique pattern of thinking and assigning value is called the Value Structure. Its principal components comprise thinking about objects, discerning their different aspects, making judgment and choosing, in other words, it involves the processes of filtering, storing, and analyzing data.
However, as the real luxury market moves into the stratosphere, it’s leaving open a vast universe in which mass marketers can fulfill the neo-luxury desires of mass consumers. And these consuming masses have shown strong evidence they are ready, willing and able to pay premium prices for products and services that were once considered commodities.
From ice cream to bottled water, beer to potato chips, coffee to coffee pots, washing machines to power saws, there isn’t a mass-market category that hasn’t jumped onto the “up-branding” bandwagon-and a very wise jump it is. Adding a premium product to an already strong brand name is a great way to drive brand growth and drive up margins. In fact, it can cast a positive halo over the entire brand family of products, making them all seem worth more.
While this incredible market opportunity was recognized most presciently by brands such as Target and Trader Joe’s, it’s no longer a trend. Thanks to the internet and other media channels, consumers have changed too: People are more informed and more worldly-wise than ever before. There’s greater awareness of what’s sophisticated, what’s hot and, more important, what’s cool. Having long satisfied their need for the basics, midlevel American consumers are no longer content with midlevel products and services.
With basic water needs satisfied, for example, American consumers want Evian, Deja Blue, Glaceau or any bottled-water brand carried in Patagonia water pouches by athletes, movie stars and politicians.
Consumers may get hungry, but no basic burger will do: Nieman Ranch beef cooked on one of Frontgate’s sleekest grills followed by a Tassimo espresso is the only way upbranders will go. Some even think they’ll be loved far better if they use Olay Regenerist and Crest Vivid White and launder their Victoria Secrets in Whirlpool Duets.
On another level, given all the stresses of the world, there seems to be an increasing desire to “take care of me.” People want a bit of luxury however they can get it. Starbucks, early on, recognized that while not everyone can afford to go to Tiffany’s, they can enjoy the small indulgence of a grande nonfat latte. The coffee costs $5-a small price to pay to treat oneself well.
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