A Veblen good is a good whose demand rises as its price climbs, against the usual law. The reason: what you buy is not only the object, but the status signal that a high price makes credible. Luxury is its purest example.
1 What is a Veblen good?
When dear becomes desirable.
Definition
The good whose demand rises with its price
Most goods obey the law of demand: the dearer they are, the less we buy. A Veblen good does the opposite. Beyond a certain threshold, a price rise makes it more desirable, because the high price itself becomes an outward sign of status. Named after the economist Thorstein Veblen, who described "conspicuous consumption" in 1899, it illuminates luxury, art, certain watches and cars.
2 Where it comes from
You buy not the object, but what it says.
Three drivers
①
Distinction. A high price keeps the crowd out: owning the object signals that you can afford it, that you belong to a narrow circle.
②
The quality signal. Lacking better, we read the price as a promise of quality or authenticity, real or assumed.
③
Maintained scarcity. Houses cap quantities and raise prices to preserve exclusivity, an "abundant rarity" in Jean-Noël Kapferer's phrase.
3 The pyramid of desire
Status needs a base.
The social mechanism
The top inspires, the base sustains
A Veblen good works as a pyramid. At the top, a few very wealthy supply prestige and desirability. At the base, a crowd of aspirational buyers, who buy the entry level to touch a little of that status, supply the volume and most of the revenue. The paradox: the good is sold for the rich, but it lives by those who aspire to be. Raising prices too far can drive away that base and dry up the source.
4 The limits
The effect has bounds.
Where the effect stops
The Veblen effect is not infinite. If the price rises without real counterpart, or if the status becomes commonplace (everyone owns the object, or credible copies circulate), the signal weakens and demand eventually falls. The spring reverses: what made people want can make them flee. The Veblen good is also distinct from the snob effect (wanting what others don't have) and the bandwagon effect (wanting what others have).
5 Takeaways
To remember.
✓
A Veblen good sees its demand rise when its price rises.
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You pay for a status signal, not just a use.
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The mechanism rests on a pyramid: the top gives prestige, the base gives volume.
This notion illuminates these analyses
First published: 16 June 2026