Which points to arguments like "WHY ARE DUMBLES SO EXPENSIVE?"
Is it because they are rare?
it because of Alex Dumble's "crystal lattice yadda yadda impressive speech?"
Is it because Robben Ford and Joe Bonamassa uses them?
Consider geting a Dumble clone (i.e. Two Rock, Fuchs) and it still costs way too much for the average joe, "because it was modeled after a $25k original, so they're making one for 10% the price."
IMO, the real argument here is determining AT WHAT PRICE POINT DOES A GUITAR START TO YIELD LESS IMPROVEMENTS? (I think we made a thread eons ago re: the law of diminishing returns and guitars).
FACT: I've seen rich folks here whining about buying some really expensive guitars (>$3k) and not publicly admitting they hate the purchase simply because they lose the 'mojo' effect on people.
Haaay. Let me change hats now and yes, I teach Principles of Marketing as well. Salamat sa MBA and I'm not a simple cost-bound techie geek.
There are many models of pricing. The most basic is the cost-plus where you get the cost and add your margin. But this usually applies to commodities like rice, sugar, instant noodles and China made guitars.
Then there's the prestige or "luxury" pricing, which has no direct bearing on the cost of the product. You're maintaining a certain "status" and "exclusivity" and that's why you select a price range that's relatively beyond the reach of the masses.
Like, do you honestly believe it "costs" a Porsche so and so number of dollars then they add a small amount as margin ? BS. They shelf the product into a certain price range, almost independent of the cost of the product itself. Of course by default there must be greater quality in this product than the average corners-cut-mass-produced car. Rich people don't get rich by being stupid you know.
Then let's see this case I had in Strama...from the early 90's. It says "It takes 100 Corollas to reach the profit margin of 1 Lexus". Does it mean that Corollas don't have positive profit margins ? I don't think so or Toyota would be non-existent today. It just means that the profit-to-cost ratio of a Lexus is many times more than a Corolla.
So, Pricing and Quality are never linearly proportional (as many commenters have already pointed out) because...and I'll put this in bold text
there are other things that you're paying for apart from the actual cost of the product. Lemme share Jobet's definition of Marketing, which is not in the textbooks but I teach my students anyway.
"Marketing is the study and manipulation of the purchase psychology to influence the outcome of transactions, or create profitable relationships. "
So pricing (and I might get killed for this) is not always based on COST. It is sometimes based on PERCEIVED VALUE. How a marketer studies and manipulates the purchase psychology to raise the perceived value...well...that is the essence of a guitar product marketer's job.