Exploring the ‘Veblen Effect’

The Veblen Effect – we’ve all experienced this social phenomena yet most of us are unaware that it even has a name.

Pepell Lynne describes the Veblen Effect in his economic journals as the purchase of “brand name products that are functionally equivalent to cheaper products but confer a social status valued by the consumer” (Pepall 2016).


It is further described as the “setting of canons of taste on the part of the wealthy leisure classes, which members of lower classes seek to emulate” and has previously been associated with the ‘bandwagon effect’ and the ‘snob effect’. The ‘bandwagon effect’ states that a positive externality occurs more people own the same product and the ‘snob effect’ states the opposite, as a negative externality occurs with increasing ownership (Kuwashima 2017; Veal 2016).

At this point, I must stress that there is a significant difference between cheap goods, quality goods, and luxury goods. The Veblen Effect focuses on quality vs luxury goods as opposed to cheap vs quality or cheap vs luxury items. For example, the $15 purse from Kmart that falls apart after a month vs the $50 purse that holds its own for years vs the $2000 purse you bought because it holds its own for years and has the Gucci logo on the side (Miller 2017).

gucci handnag.jpg

So and so has found that there are four characteristics that influence consumers to purchase luxury goods, these being need-for-uniqueness, vanity, status-seeking, and susceptibility to interpersonal influence (Kastinakas 2011).

Luxury brands attempt to appeal to these aspects of consumer’s personalities in advertisements such as this one for Gucci Premiere perfume.

Gucci’s marketing team has used celebrity endorsement to appeal to consumers’ sucseptibility to interpersonal influence, and the colour gold to appeal to the status-seeking behaviour of consumers. In addition to this, vanity and need-for-uniqueness have also been touched upon by the use of visual cameras and lights that suggest a photoshoot environment, hence making people who purchase the Gucci perfume feel like celebrities.

Other sources have pinpointed that self-esteem is the main reason that when people do splurge on luxury goods, they have to splurge on the genuine article as opposed to an almost identical cheaper knock-off, and this relates to obtaining a sense of belonging and giving in to hedonistic values. (Page 2017)

giphy (1)

Veblen himself “saw this process as unjust, invidious and wasteful”, and similar to the vulturous marketing teams at Gucci and other luxury brand names “he did not explore wider implications for personal well-being” (Pepall 2016).

Consumer debt in the world has reached an all-time high, yet consumers still find themselves sucked into the illusion that they need to wear $5,000 shoes to feel good about themselves. Why?

The pricing and promotion of these goods has been meticulously orchestrated by marketers. What qualifies these goods to be sold at such a high price? Are they made of unicorn dust? Do they have a map to the fountain of youth stitched into their soles?

giphy (2)

Marketers at luxury brands make consumers believe that they will instantly feel like celebrities if they purchase their products, when in reality they might feel satisfied for a few days before they realise they’ve maxed out their credit card on a misplaced sense of self-worth. I firmly agree with Veblen in his distaste for the process, however hypocritical that might be.


Kastinakas, M, Balabanis, G 2011, ‘Bandwagon, Snob and Veblen Effects in Luxury Consumption’, Advances in Consumer Research, vol. 38, pp. 609-610

Kuwashima, Y 2015, ‘Structural Equivalence and Cohesion Can Explain Bandwagon and Snob Effect’, Annals of Business Administrative Science, vol. 15, November, pp. ??

Miller, G.E. 2017, ‘Cheap Vs. Quality & Quality Vs. Luxury’, 20somethingfinance, Weblog post 13 February 2017, <https://20somethingfinance.com/cheap-vs-quality-vs-luxury/&gt;.

Page, V 2017, ‘The Psychology Behind Why People Buy Luxury Goods’, Investopedia, March 15, viewed May 7 2017, <http://www.investopedia.com/articles/personal-finance/091115/psychology-behind-why-people-buy-luxury-goods.asp&gt;

Pepall, L 2016, ‘The “Veblen” effect, targeted advertising and consumer welfare’, Economics letters, vol. 145, August, pp. 218-220

Veal, A.J. 2016, ‘Leisure, income inequality and the Veblen effect: cross-national analysis of leisure time and sport and cultural activity’, Leisure studies, vol. 35, no. 2, March, pp. 215-240


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