Veblen goods are types of luxury goods for which the quantity demanded increases as the price increases, an apparent contradiction of the law of demand, resulting in an upward-sloping demand curve.
Examples of Veblin Goods
- Swiss watches.
- Designer handbags.
- Certain wines.
- Jewelry (especially diamonds).
- Luxury cars.
All these are in demand because they are expensive. Put simply, people who buy them want to show that they have style, class, money, and good taste.
Veblen Goods – Related Concepts
The Veblen effect is one of a group of theoretically possible anomalies in the general theory of demand in economics. Examples of other related effects are:
- Snob Effect: consumers want to use exclusive items where price reflects quality, style, good breeding, culture, etc. Consumers prefer an item because it is different from those commonly preferred.
- Bandwagon Effect: this is a psychological effect in which the preference for an item grows as the number of consumers buying it increases.
- Network Effect: as the number of people with, for example Facebook or telephones, increases, the value of being on Facebook or having a telephone grows too, because the user can reach more people.
- Common Law of Business Balance: people may see a cheap article and think ‘You get what you pay for’. They may conclude that a low price for a product suggests that the maker used shortcuts, he or she may have used cheaper materials, and compromised on quality.