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Veblen goods are luxury goods that receive more demand at a higher price point. They are a rare exception to the economic law of supply and demand. The ability of a veblen good to attract more sales at a higher price is due to perceptions of quality. In other words, people may view a higher price as an indication of quality. Alternatively, some individuals may prefer goods that are prohibitively expensive as a symbol of wealth, a type of social status.
Veblen goods tend to be profitable and thus competition in related industries such as fashion is intensive. |
Function | | Definition | A good or service that achieves higher demand at a higher price point. | Short Term vs Long Term | Demand for a luxury item almost always jumps if it is discounted. However, in the long term a brand that maintains higher prices may be rewarded with increased demand. It is therefore common for demand for luxury items to be normal in the short term and veblen in the long run. As a result, discounting luxury items is often seen as damaging to long term demand. | Related Concepts | |
Economics
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