When I was researching Cristal last weekend for the Valentine’s Day gift post, I saw that the luxury champagne was described as a Veblen good.
What’s that, you ask?
It’s an economics term, but basically, a Veblen good is an item where demand rises as price rises.
Here’s an explanation from author Tejvan Pettinger on http://www.economicshelp.org:
Why might people buy more as price increases?
In the case of a Veblen good it is because people think more expensive goods are better quality, and so people buy more. Studies suggest people do get more satisfaction from receiving expensive goods. It is possible that designer clothes or luxury cars may sometimes meet the criteria of veblen goods. This is often termed the snob effect – people equate price to quantity.
If veblen goods do exist the demand curve would slope the opposite way.
In essence, it’s a reversal of the law of demand. And the idea is not new; it dates back to economist Thorstein Veblen, a fellow native Wisconsinite who identified the concepts of status-seeking and conspicuous consumption in the late 1800s.
Reading about it made me just feel gross and shallow about my own habits, tastes and desires, but I guess a reality check can be a good thing.
Excuse me now as I take my Rolls Royce out for a spin…