The goods that become more desirable the more expensive they get
Price elasticity is a funny thing.
Rationally, the more expensive something becomes, the less likely it is to be bought.
For a certain set of goods, however, quite the opposite occurs. The desire for them increases the more expensive they become.
It is one of a family of apparent contradictions of the ‘Law of Demand’ in microeconomics, where greater demand should result in lower prices.
These ‘Veblen’ goods include fine wines, designer handbags, luxury cars and watches.
The term is named after the American economist Thorstein Veblen, who famously introduced the term “conspicuous consumption.”
What makes ‘Veblen’ goods so desirable is that they are the ultimate status symbols for those living this lifestyle.
For maximum impact, the ‘scarcity effect’ is employed to make them appear even more desirable.
One example is the Range Rover SV coupe launched at the 2018 Geneva Motor Show.
The regular model starts at £79,995. This model, which is essentially the same product (minus two doors), is priced at £240,000 and is limited to only 999 examples.
In summary, you can employ two key methods to help what you sell to become a Veblen good.
First, limit its supply (even artificially doing this works— the Diamond industry has been doing so for years).
Second, show that the product is popular (find a metric that works for you and then flaunt it).
If you're interested in learning more about how psychology impacts decision-making, check out our popular course on Behavioural Economics.
