Veblen

Veblen (pronounced vebluhn)

A product (a good) for which demand increases as the price increases, an anomaly in the classical laws of demand in the science of economics.

1899: The name is from the author, US economist and sociologist Thorstein Veblen (1857–1929); his observation was first mentioned in his book The Theory of the Leisure Class (1899).

Hermes Pink Ostrich Handbag.

The Veblen effect is one aspect of conspicuous consumption; it describes individual or corporate spending of money on goods and services for the purpose of displaying their financial resources, usually as a means to manifest social power and prestige.  It's related to the dealer's saying in the antique business: "If something doesn't sell, keep putting up the price until it does".  As a phenomenon the behavior obviously pre-dates social media but TikTok, Instagram and such have proved the ideal platform for both the flaunting of wealth and faking it.  Veblen goods are those which (at least to a certain point), behave differently from the classic demand curve of orthodox economics in that demand for them rises as the price increases.  They are usually luxury products (a thing something inherently a product of their price) but there are cases where transitory shortages not always directly related to cost can create scarcity and thus a desirably; the diabetes drug Ozempic which is used by those attracted to its appetite-suppressing side effect is an example.  The retail price at which most luxury goods are sold can contradict classic economic theory as demand, instead of increasing with a decrease in price, follows the opposite curve although the demand curve does not increase indefinitely with the price.  Once a certain threshold has been reached, demand will drop or fall away completely but the propensity to purchase goods and services on account of the higher rather than lower price differential compared to average prices in a generic category is one of the principal characteristics of the luxury domain.  

Lindsay Lohan with Hermes Pink Ostrich Birkin, London, 2017.

One interesting reaction by manufacturers or retailers to a price threshold being reached (at which point demand begins to fall), is artificially to create an impression of a supply-side shortage.  When it appears a price-point is exceeding what even conspicuous consumers will pay for a certain handbag, manufacturers sometimes claim they’re limited-production items available only to selected clients.  This is rarely true, the handbag being just another part-number, manufacturers producing as many as required to meet demand.  Economists provide some nuance to the Veblen effect by noting the influence of what they call “income and substitution effects”.  The income effect suggests that as the price of a Veblen good rises, individuals with higher incomes may actually experience an increase in real income (since they can still afford the more expensive item) and therefore demand more of the luxury item; the substitution effect is overridden by the desire for the specific status or prestige associated with the higher-priced item.  The professionals also caution the Veblen effect is not universal and both between and within cultures it can’t be relied upon always to appear as some manufacturers and retailers has discovered.