Positional Goods

What Are Positional Goods?

Positional goods are goods and services that people value because of their limited supply, and because they convey a high relative standing within society. Positional goods may include brand-name luxury handbags, a custom Feadship motor yacht, or front-row tickets to the Super Bowl.

Understanding Positional Goods

Positional goods often exhibit superior quality and features. However, they derive most of their value when they succeed in distinguishing their owners as members of a favored group. In general, the definition of positional goods extends to luxury services, memberships, and vacations, even though these are not goods. In some cases, the definition also may apply to university degrees and plum jobs that are difficult to get and also convey a high status.

Positional goods project exclusivity, and companies that market positional goods are careful to craft an image that their products are not accessible to the masses. If economic growth were to grow to the point where positional goods became affordable and widely available, the positional goods would lose their exclusivity, and likely their value. These would fail to become positional goods, and other positional goods likely would take their place.

Economist Thorstein Veblen is famous for his study of how social contexts influence economic activity. Veblen introduced the term "conspicuous consumption" to describe his observations of how people can use goods to indicate social position.

Examples of Positional Goods

Top luxury brands include Louis Vuitton, Prada, Burberry, and Rolex. All attempt to convey prestige and are considered positional goods. So, too, are high-end Italian sports cars and owning an exquisite fur coat. For example, a high-end Lamborghini that costs more than $200,000 is a positional good.

Conversely, a Chevrolet Corvette that may have similar if not more horsepower than a Lamborghini, and a similar top speed and acceleration, is not a positional good because of its far-lower price tag. The Corvette indeed costs far more than the median automobile, but there are tens of thousands of them produced a year, and the Chevrolet brand is not exclusive.

The Lamborghini derives a good deal of its value because it is far more difficult to attain due to its price and because fewer than 1,000 may be produced in a given year. Moreover, Lamborghini owners want to be associated with the luxury brand and do not care that the Corvette delivers similar performance for a far-lower price.

The same is true for high-end alcoholic beverages that cost $250 a bottle. These also would be considered positional. If the beverages became popular and the company that makes them began distributing them to a far wider audience, changing the price to $40 a bottle, they would fail to become positional goods, as the exclusivity set by the high price would be lost.