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A commodity is a Veblen good if people's preference for buying it increases as a direct function of its price.
The definition does not require that any Veblen goods actually exist. However, it is claimed that some types of high-status goods, such as expensive wines or perfumes are Veblen goods, in that decreasing their prices decreases people's preference for buying them because they are no longer perceived as exclusive or high status products. The Veblen effect is named after the economist Thorstein Veblen, who invented the concepts of conspicuous consumption and status-seeking. Wine is an alcoholic beverage produced by the fermentation of grapes and grape juice. ...
Perfume is a mixture of fragrant essential oils and aroma compounds, fixatives, and solvents used to give the human body, objects, and living spaces a lasting and pleasant smell. ...
Norwegian-American economist and sociologist Thorstein Veblen Thorstein Bunde Veblen (July 30, 1857 – August 3, 1929) was a Norwegian-American economist and sociologist. ...
Conspicuous consumption is a term introduced by the American economist Thorstein Veblen, in The Theory of the Leisure Class (1899). ...
The Veblen effect is one of a family of theoretically possible anomalies in the general theory of demand in microeconomics. The other related effects are: The supply and demand model describes how prices vary as a result of a balance between product availability at each price (supply) and the desires of those with purchasing power at each price (demand). ...
This article does not cite its references or sources. ...
- the snob effect: preference for a good increases as its rarity increases;
- the bandwagon effect: preference for a good increases as the number of people buying it increases;
- the counter-Veblen effect, in which preference for a good increases as its price falls.
The first two of these, and the Veblen effect, are discussed in a classic article by Leibenstein (1950). The concept of the counter-Veblen effect is less well known, though clearly it is logically needed to complete the family; it was introduced by Lea et al (1987). This article does not cite its references or sources. ...
The bandwagon effect is the observation that people often do (or believe) things because many other people do (or believe) the same. ...
Note that none of these effects in itself predicts what will happen to actual demand for the good (the number of units purchased) as price changes - they refer only to preferences or propensities to purchase. The actual effect on demand will depend on the range of other goods available, their prices, and their substitutabilities for the goods concerned. The effects are anomalies within demand theory because the theory normally assumes that preferences are independent of price or the number of units being sold. They are therefore collectively referred to as interaction effects.
Note too that the interaction effects are a different kind of anomaly from that posed by a Giffen good. A Giffen good is one for which observed demand rises as price rises, but the effect arises without any interaction between price and preference - it results from the interplay of the income effect and the substitution effect of a change in price. A Giffen good is a product for which a rise in price of this product makes people buy even more of the product. ...
Recent research (e.g. Chao and Schor, 1998) has begun to examine the empirical evidence for the existence of goods which show these interaction effects.
References - Chao, A., & Schor, J. B. (1998). Empirical tests of status consumption: Evidence from women's cosmetics. Journal of Economic Psychology, 19, 107-131.
- Lea, S. E. G., Tarpy, R. M., & Webley, P. (1987). The individual in the economy. Cambridge: Cambridge University Press.
- Leibenstein, H. (1950). Bandwagon, Snob, and Veblen Effects in the Theory of Consumers’ Demand. Quarterly Journal of Economics, 64, 183-207.
| Types of goods (edit) collective good (social good) - private good - common good - common-pool resource - club good - public good A good in economics is any physical object (natural or man-made) or service that, upon consumption, increases utility, and therefore can be sold at a price in a market. ...
In economics, a public good is a good that is hard or even impossible to produce for private profit, because the market fails to account for its large beneficial externalities. ...
In economics Private good is an opposite of the public good. ...
The common good is a term that can refer to several different concepts. ...
The terms common-pool resource (CPR) and common property regime (CPR) (as well as common property resource) are often used interchangeably. ...
Club goods are a type of goods in economics, sometimes classified as a subtype of public goods, that are non-competetive and excludable. ...
In economics, a public good is a good that is hard or even impossible to produce for private profit, because the market fails to account for its large beneficial externalities. ...
durable good - non-durable good - intermediate good (producer good) - final good - consumer good - capital good.
Giffen good - inferior good - normal good - luxury good - Veblen good - superior good
search good - (post-)experience good - merit good - credence good In economics, a good is considered rivalrous if its consumption by one person prevents it from being available to others. ...
Non-excludable goods are defined in economics as goods whereby it is impossible to stop a person consuming that good when it has become publicly available at a relatively low cost. ...
A complement good (or complementary good) is a good that should be consumed with another good. ...
In economics, one kind of good (or service) is said to be a substitute good for another kind insofar as the two kinds of goods can be consumed or used in place of one another in at least some of their possible uses. ...
The free good is a term used in economics to describe a good that is not scarce. ...
Scarcity is a central concept in economics. ...
A positional good is an intrinsically scarce good whose value is determined by its social context, as opposed to a material good which has innate value. ...
A durable good, or a hard good is an economics term for a good which does not quickly wear out, or more specifically; it yields services or utility over time rather than being completely used up when used once. ...
A durable good, or a hard good is an economics term for a good which does not quickly wear out, or more specifically; it yields services or utility over time rather than being completely used up when used once. ...
Intermediate goods are goods produced by one firm for use in further processing by another firm. ...
In economics Final goods are goods that are ultimately consumed rather than used in the production of another good. ...
Definitions of consumer goods by Ben Murray New goods acquired by households for their own consumption. ...
Capital goods, in contrast to consumer goods, are goods used in the production of (physical) capital. ...
A Giffen good is a product for which a rise in price of this product makes people buy even more of the product. ...
In consumer theory, an inferior good is a good that decreases in demand when the consumers income rises, unlike normal goods, for which the opposite is observed. ...
In economics, normal goods are any goods for which demand increases when income increases. ...
In economics a luxury good is a good for which demand increases more than proportionally as income rises, contrast with inferior good and normal good. ...
Superior goods make up a larger proportion of consumption as income rises, and as such are a type of normal goods in consumer theory. ...
In economics, a search good is a product or service with easily observable features and characteristics. ...
In economics, an experience good is a product or service where product characteristics such as quality or price are difficult to observe. ...
A merit good is defined in economics as a good that is under consumed if provided by the market mechanism because individuals typically consider how the good benefits them as individuals rather than the benefits that consumption generates for others in society. ...
A credence good is a term used in economics for a good whose utility impact is difficult or impossible to ascertain, unlike experience goods the utility gain or loss is difficult to measure after consumption as well. ...
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