Why do fashion brands maintain classics for years or even decades amidst the ever-changing fashion trends? Why do some fashion brands position classic products as premium items, while others treat classics as entry-level offerings? In this research, our aim is to explain the emergence of fashion classics and various classics strategies by considering the possibility of cross-generation signaling in an overlapping generations model. We view fashion as a social device for status signaling and treat the concept of “classics” as an equilibrium outcome. We find that “premium classics,” where the firm offers the same product design exclusively to high-type consumers in each generation, can arise provided that there is moderate disparity in social capital within and across generations. Premium classics need to be path-dependent, in that exclusivity in an earlier generation lends to exclusivity in the latter generation. This path dependency induces the firm to discipline itself from deviating to capitalize on the social value generated in earlier generations to enhance social value for low-type consumers in future generations. This outcome can occur when the accumulation of social capital is moderate, such that the cost of committing is neither too high nor too low.
Note: Research papers posted on SSRN, including any findings, may differ from the final version chosen for publication in academic journals.