[notahacker]

Strictly speaking luxury goods are income elastic (by definition) but can be either price elastic or inelastic at different points on the pricing curve, with profit-maximising suppliers attempting to set prices at the level where it reaches unitary elasticity. But when we're talking about designer brands (as opposed to the strict economic definition of a 'luxury good' which encompasses most of the shoe market), they typically price above that level anyway to maintain "exclusivity". Hermes made a point of publicly stating that it would pass on 100% of tariffs costs to consumers, and whilst I haven't tracked Louboutin shoe prices I doubt their customer base for shoes costing 10x their less fashionable equivalent is going to permanently refuse to pay a 15% price increase. Particularly not when it also applies to the brand's closest competitor in the form of other trendy European designer shoe brands. I suspect the tariff-eating that occurs in the US fashion market will tend to be US-based retailers cutting their margins rather than the foreign brand cutting its wholesale prices too...

see also: https://www.investopedia.com/ask/answers/012915/what-effect-...

[Gareth321]

I don't think I agree. Luxury goods are typically defined as both income and price elastic in economics textbooks. I agree that brands can and do employ various marketing strategies like exclusivity, as you describe. This is also true of low elasticity goods like Liquid Death selling expensive water. Still, in a competitive market where the wealthy can choose other designer brands with similar class projection and quality, theory tells us that customers can and do switch, and the market finds a price equilibrium close to the pre-tariff price.