Economics & market laws · law 027
Veblen Effect (Veblen Goods)
Also known as: Conspicuous consumption
By Shivam Bhandari · Reviewed 31 October 2026 · How we write
what it means
For some luxury goods, demand rises as price rises, because a high price signals status.
How Veblen Effect works
Most goods sell less at higher prices. Veblen goods break that rule: a cheaper luxury handbag can be less desirable because the price is part of what the buyer is paying for.
Even outside true luxury, price signals quality. Underpricing a premium product can make customers suspicious.
where it comes from
Named after economist Thorstein Veblen, who coined ‘conspicuous consumption’ in The Theory of the Leisure Class (1899).
Veblen Effect examples in business
Luxury fashion
Luxury houses rarely discount publicly, because visible discounts erode the status that justifies their prices.
Weddings
Premium wedding services often win clients precisely because they cost more than competitors.
Consulting
A consultant who doubles fees finds that some clients take the advice more seriously.
How to apply it
- 1If your product signals status or identity, test higher price points before cutting price.
- 2Protect price integrity — avoid frequent public discounting.
- 3Invest in cues that support a premium price (packaging, service, scarcity).
- 4Use exclusivity rather than discounts to drive demand.
common misreading
Most products are not Veblen goods. Raising prices on everyday products usually just reduces sales.
ask yourself
Could a higher price make your product more desirable to the right customer?
put it into practice
Frequently asked questions
What is Veblen Effect?
For some luxury goods, demand rises as price rises, because a high price signals status. Most goods sell less at higher prices. Veblen goods break that rule: a cheaper luxury handbag can be less desirable because the price is part of what the buyer is paying for.
Who came up with Veblen Effect?
Named after economist Thorstein Veblen, who coined ‘conspicuous consumption’ in The Theory of the Leisure Class (1899).
How do you apply Veblen Effect in business?
1. If your product signals status or identity, test higher price points before cutting price. 2. Protect price integrity — avoid frequent public discounting. 3. Invest in cues that support a premium price (packaging, service, scarcity). 4. Use exclusivity rather than discounts to drive demand.
What is a common misunderstanding of Veblen Effect?
Most products are not Veblen goods. Raising prices on everyday products usually just reduces sales.