What do Ben Stein and Lonzo Ball have in common?

As the headline states, I am attempting to draw a parallel between what happens on the hardwood, and what happens at a hard wooden desk in an office building. Now, right off the bat, you may think that there is not a whole lot in common between economists and sneakerheads, but apparently both believe in certain forces that dictate what people will, or will not pay for an item.

Let's review some economic terms quickly:

• Utility-The Perceived 'usefulness' to the customer
• Price- The actual price paid
• Cost- The price paid + The Opportunity Cost of not spending that money elsewhere

The first real push at challenging the prevailing price points for an ultra-premium basketball shoe was in the early 90's, by none other than Michael Jordan backed by Nike. These shoes sold for around $105 (~$175) today and were far and away the most sought after, and recognizable shoes around. Still sold today, the original Jordans are a top seller.

Once people have paid nearly $200 (in today's money) for shoes, the term 'Price Ratcheting' start to kick in. Price Ratcheting is the concept that for many items, as price rises, consumers adjust to a new level of 'normal' and there is little consumer pressure for the item to return to it's previous price point. An example of this could be gasoline prices: I still feel gas is 'cheap' if it is under $2.50/gallon as a hangover from the early 2000's prices of nearly $4.00/gallon.

There is a subconscious truth to this. So, let's look at a history of some expensive shoes, and see if you draw the same conclusion:

• 1996- Reebok The Question, $165 (or $65,000 for ones with real diamond laces!!!) (No, really)
• 1997- Nike 'Foamposit, $180
• 2002- Air Jordan 17, $205
• 2004- Nike Zoom Lebrons, $200-$400 (depending on colours)
• 2005- Adidas_1, $250
• 2012- Nike Air Jordan XX8, $275+
• 2014- Nike Lebron 11 Elites, $375
• 2016- Adidas, Yeezy 750 Boost, $359
• 2017- Big Baller Brand ZO2, $495-$695 (for larger sizes)

As sporting good brands are now charging designer money for shoes, I ask you: Are $100 basketball shoes cheap now? Price Ratcheting has certainly set in for the ultra-premium 'athleisure' market segment, as various companies repeatedly play top trumps in the price leader category. I believe there will always be a market for the most expensive 'thing' in every category. Even if the product is rubbish, the person still has the perceived value of having bought the most expensive 'X', which adds utility to their purchase.

In conclusion, I may be buying some new shoes soon, but not from this list. The opportunity costs of spending nearly $700 on shoes for me means no more groceries for a while. When I make my move, I am thinking something blue, possibly suede. But overall, it looks like high end shoes could soon touch the century mark!

-Andrew J Leonardis

Please feel free to get back to me with questions, and I always love comments! ([email protected])

#sneakerheads #shoes #basketball #economics #BigBallerBrand #nike #adidas #Reebok