Veblen Goods Explained: How They Work, Types, and Examples


Veblen goods are luxury items that defy the usual law of demand by becoming more desirable as their price increases. This article delves into the concept of Veblen goods, their characteristics, and how they differ from Giffen goods. We explore the causes of the Veblen effect and answer common questions about these exclusive products.

What is a veblen good?

A Veblen good is a unique type of product for which demand rises alongside its price, contrary to the typical pattern of falling demand with increasing prices. These goods are associated with exclusivity and are considered status symbols. Unlike regular goods, Veblen goods have an upward-sloping demand curve.

Understanding a veblen good

The increased demand for Veblen goods is a result of consumer preferences that link higher prices with enhanced desirability. This phenomenon is named after Thorstein Veblen, the American economist known for introducing the concept of “conspicuous consumption.”
Veblen goods are quite common and are easily distinguishable from Giffen goods, which are rare and more challenging to identify. Veblen goods typically include expensive and exclusive items like designer jewelry, luxury cars, yachts, and high-end watches. They are primarily targeted at affluent individuals and are often sold in upscale boutiques rather than common department stores.

Contradiction to conventional market forces

Veblen goods defy the fundamental law of demand, which posits an inverse relationship between price and quantity demanded. The appeal of exclusivity drives this unusual demand pattern. When the price of a coveted, expensive product rises, it can actually become more attractive to those who value status, as it becomes less accessible to the average consumer.
However, lowering the price of such a product might reduce its exclusivity and, consequently, its appeal. This could lead status-conscious consumers to shun the product while still making it unaffordable for the mass market. In this case, lowering prices decreases overall demand, which is contrary to typical market behavior.

While there’s no fixed price point distinguishing a Veblen good from a regular product, Veblen goods are generally priced significantly higher than basic alternatives within the same category. For instance, while quality watches can be found for under $100, a Veblen watch might have a four, five, or six-digit price tag.

Veblen goods vs. giffen goods

Both Veblen and Giffen goods exhibit an upward-sloping demand curve, indicating that demand increases as prices rise. However, their key difference lies in the type of goods they represent:

  • Veblen goods are luxury items symbolizing societal status, such as luxury cars, designer jewelry, and fine wines.
  • Giffen goods are essential products, including items like rice, potatoes, and wheat, with no readily available substitutes.

Veblen goods are numerous and relatively easy to find, while Giffen goods are relatively rare, and there’s even debate about their existence.

Causes of the veblen effect

Studies suggest that people derive greater satisfaction from purchasing Veblen goods because of the sense of exclusivity and importance associated with them. Many individuals are willing to pay a premium for these goods, believing it’s worth the cost.
When a product is priced high, consumers often assume it must be of superior quality, even if that’s not necessarily the case. Marketing and brand identity play a significant role in this perception. Companies may source or produce their goods in the same manner, but branding and marketing create price differences. When the price increases on such a product, consumers may interpret this as an indication of higher quality, justifying the higher cost.

Similarly, goods that are perceived as hard to acquire often command higher prices. This is evident in the art world, where paintings by artists like Picasso or Monet fetch millions due to limited availability, even if the price doesn’t necessarily reflect the quality of the art.


Here is a list of the benefits and drawbacks to consider.

  • Clarity: The article provides a clear and concise explanation of Veblen goods, making the concept accessible to readers.
  • Informative: It covers the key aspects of Veblen goods, including their characteristics, differences from Giffen goods, and the causes of the Veblen effect.
  • Well-Structured: The article follows a well-organized structure with informative subheadings, making it easy for readers to navigate and understand the content.
  • FAQ Section: The inclusion of a FAQ section addresses common questions, enhancing reader comprehension.
  • Relevance: The article uses real-world examples and practical explanations, making it relevant to readers interested in personal finance and consumer behavior.
  • Visuals: The article lacks visual aids such as images or graphs, which could enhance reader engagement and understanding.
  • Length: While the article is informative, it may be considered lengthy for readers seeking quick information.
  • Depth: Some readers may desire a more in-depth analysis of specific examples of Veblen goods in various industries.
  • Citations: While the article mentions sources, direct citations within the text could add credibility and allow readers to explore the topic further.
  • Practical Application: Providing insights into how consumers can use this knowledge in their personal finance decisions would be a valuable addition.

The bottom line

Veblen goods are high-quality, luxury items that people purchase to elevate their self-esteem. Their high prices are a key aspect of their allure, causing demand to increase as their prices rise. As long as human nature values exclusivity and status, the market for Veblen goods is likely to remain strong.

Frequently asked questions

What is the difference between Veblen and Giffen goods?

The primary distinction between Veblen and Giffen goods is their nature. Veblen goods are luxury items like cars, yachts, and designer jewelry, while Giffen goods are essential products such as potatoes, rice, and wheat. Both types exhibit increased demand as prices rise, but for Veblen goods, it’s about exclusivity, whereas for Giffen goods, it’s due to their essential nature.

Are Veblen goods always expensive?

Yes, Veblen goods are invariably expensive, and their high price is integral to their appeal. People purchase these goods to showcase their societal status, engaging in a practice known as “conspicuous consumption.”

Are Veblen goods high- or low-utility goods?

Veblen goods are considered high-utility items because they make individuals feel exclusive and important. People are willing to pay a premium for these high-quality, exclusive products that are beyond the reach of the average consumer.

Key takeaways

  • A Veblen good is a product that becomes more desirable as its price increases.
  • These goods are often high-quality, exclusive, and symbols of status.
  • They appeal to affluent consumers who value their utility.
  • The demand curve for Veblen goods goes against the norm, trending upward as prices rise.
  • Veblen goods defy the fundamental law of demand, which posits an inverse relationship between price and quantity demanded.
View Article Sources
  1. Veblen Effect – City of Monash
  2. A Case Study of Veblen Effects in Higher Education – Seton Hall University
  3. Veblen Goods and Urban Distinction – Bureau of Labor Statistics
  4. Privacy Policies and Competition Law – Federal Trade Commission
  5. Giffen Goods: Definition, Historical Perspective, and Real-life Examples – SuperMoney