What is a
Thorstein Veblen coined the phrase “conspicuous consumption” in 1899 when commenting on the human desire to publicly display wealth through the acquisition of consumer goods.
A Veblen Good does not adhere to the traditional laws of price and demand. Below a certain price, the price/demand dynamics are consistent with conventional products – higher prices result in a lower demand. However, above a certain price, this relationship reverses, and demand rises along with price increases.
Veblen products are typically luxury goods, such as super-cars, which routinely sellout before production is begun, despite (or due to…) prices in excess of $2 million.
Behavioral psychologists have repeatedly demonstrated the power of scarcity in driving human behavior. We are essentially primates with an evolutionary drive to want more of the things we cannot have, driven by a fear of loss. The appeal of a scarce product is further enhanced when it also publicly conveys social currency, in the form of wealth, status or power.