Veblen effect

The Veblen effect is a phenomenon highlighted by the economist and sociologist Thorstein Veblen. A Veblen good is a type of luxury good for which demand increases as the price increases, in apparent contradiction to the law of demand, resulting in an upward demand curve.

Introduction

Many years ago Leibenstein (1950) emphasized the significance of the signal effect the way people consume. This signifies that the utility of a product increases or decreases depending on whether it is purchased and consumed by other consumers. It can also depend on wheter the good has an high or low cost. In marketing, people used to buy luxury goods to impress. It is known that most consumer tacitly accept that luxury goods are bought for social signaling ambitions .

Veblen's Curve

Fig. 1 Veblen's curve

Veblen's effect, conspicuous consumption and avertising

The 'Veblen' effect, conventional associated with 'conspicuous consumption', is now associated with branded products that are functioning the same way as cheaper products but grants a better social status valued by end users. That is indeed quite the definition of the conspicuous consumption. All of the that is created by marketing and more especially; advertising. The social image implanted in a brand appellation is often the most important objective in a company's advertising strategy. This objective has gained more and more importance in contemporary times as technological and social forces amplifies the value of brand identity and its power over end users. The objective of all that is to create a Veblen's effect. In other words, nowadays, advertising is used to bring desire in the user to belong to a certain group of people that associated with a certain product .

References

• Lynne Pepall & Joseph Reiff (2016), Economics Letters Volume 145, University of Chicago Press, Duluth.
• Minas Kastanakis & George Balabanis (2011), Advances in Consumer Research Volume 38, University of Chicago Press, Duluth.

Author: MATHIEU Amaury